Dallas, Texas 06/01/2015 (Financialstrend) – Its official, Broadcom Corporation (NASDAQ:BRCM) is going to be a subsidiary of Avago Technologies Ltd (NASDAQ:AVGO) after agreeing to a $37 billion merger deal. The merger on the other hand elicits concerns on whether QUALCOMM, Inc. (NASDAQ:QCOM) will continue being the dominant force in the chips business. Qualcomm may have to rethink its strategy as competition is set to be rife in the already competitive business.
Effects OF Competition
Qualcomm may have found a way out of the current debacle with a shift of focus to data centers and network infrastructure. However, it will have to do a lot more as Broadcom Corporation (NASDAQ:BRCM) and Avago continue to gun for more market share in the already suppressed chip’s business.
Qualcomm has seen its chip business come under immense pressure with the likes of Samsung and Huawei opting to develop their own chips. In the past, it was the one supplying the needs of these two giant smartphone makers. The company’s margins could come under immense pressure even after cutting its full-year forecast out of concerns that it may struggle to seal deals with some of the big players in the smartphone business.
Avago-Broadcom merger gives phone manufacturers another marketplace to shop for chips for their devices. The combined entity will especially be targeting markets for Wi-Fi and Bluetooth chips currently being produced by Broadcom Corporation (NASDAQ:BRCM) while leveraging Avago capabilities on industrial and wired devices.
Qualcomm may be forced to look for other areas of growth which should supplement revenues from its licensing business. Growth in the semiconductor industry has slowed in the recent years calling for more consolidation among some of the players that believe they are being hurt by the competition. It remains to be seen if Qualcomm will opt to go the same way and acquire another company, all in the attempt of shielding itself from the effects of competition.
Now that Broadcom Corporation (NASDAQ:BRCM) and Avago occupy the third position in the semiconductor business, Qualcomm will have to act sooner than later before things get out of hand