As Broadcom attempts to become the world’s largest semiconductor company by purchasing Qualcomm, it is promising to maintain 5G research and invest in innovation. Today Broadcom told the U.S. Congress it will be “steadfast” in its support of 5G, and will create a new $1.5 billion fund to train the next generation of engineers in the U.S. The pledge comes as the U.S. government is calling Broadcom’s hostile takeover bid a potential threat to national security. Analysts had mixed reactions to Broadcom’s pledge.

Read More.

Some semiconductor analysts are skeptical of Broadcom CEO Hock Tan’s pledge, while others say Tan would be foolish not to invest in the next generation of wireless research. Most agree that Tan would sell some parts of Qualcomm to help repay the $106 billion in debt he has lined up to pay for the proposed $117 billion acquisition.

“Given the amount of debt that Broadcom would have to take on to close this deal, it’s almost inevitable that they would have to sell off pieces of Qualcomm to help pay for that,” said analyst Linley Gwennap of The Linley Group.

Equity analyst Stacy Rasgon of Bernstein Research said Broadcom might try to sell Qualcomm’s ARM-based server chip business, but would not be likely to sell its wireless assets.

“The core cellular business is what Broadcom wants,” Rasgon said, adding that Hock Tan “doesn’t stifle research, he focuses it.”

Rasgon also buys Broadcom’s claim that it is largely an American company. The Singapore-based firm is in the process of relocating to the United States, where more than half its employees are based.

Broadcom is promising Congress that it will work to make the United States the global leader in 5G, and said that it “will not sell any critical national security assets to any foreign companies.”

But actions speak louder than words, according to analyst Earl Lum of EJL Wireless Research. He thinks Hock Tan is “backtracking” and that the CEO’s “slash and burn” history is predictive of Qualcomm’s future if the acquistion goes through.

“He’ll stifle investment,” Lum predicts, adding that China’s Huawei stands ready and willing to pick up the slack. Lum said Huawei had the most impressive roadmap of any wireless infrastructure vendor at Mobile World Congress this year, and he thinks the U.S. government has legitimate reasons to be concerned about forfeiting the nation’s 5G future to Huawei if Broadcom buys Qualcomm.

Gwennap agrees that the security concern is real. He said Broadcom’s history suggests that the company will downplay investment and could even sell parts of Qualcomm to non-U.S. companies.

“I think it’s a legitimate issue for the government to look at,” said Gwennap. “Hock Tan has this track record of not investing in long-term technology development. … Hock Tan also has a track record of buying companies and chopping them up and selling bits and pieces.”

“There’s certainly going to need to be a lot of investment from Qualcomm and other companies to move 5G forward,” Gwennap said. “If Broadcom would decide to cut back the investments there,  Qualcomm would be in danger of falling behind just as 5G is ramping up in high volume.”

The post 5G funding: Analysts are skeptical as Broadcom pledges $1.5B appeared first on RCR Wireless News.