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Visitors to the Global Mobile Internet Conference in Beijing look at a display booth for Qualcomm in April, 2017. Broadcom’s most recent bid for the San Diego-based rival values the company at more than US$121-billion.Mark Schiefelbein/The Associated Press

The potential biggest tech merger of all time could happen in a matter of weeks amid the battle to power the world's devices.

Chip maker Broadcom Ltd. made an offer to acquire San Diego-based semi-conductor competitor Qualcomm Inc. for US$82 a share on Monday morning, sweetening a US$70-a-share bid it made late last year, which Qualcomm rejected as being "inferior" in the face of what it felt was "considerable" forthcoming value creation.

The revised deal, which Qualcomm said it would review, would value the company at more than US$121-billion – for a deal worth US$146-billion when net debt is accounted for. It's a staggering figure that, especially in the face of Qualcomm's continuing licensing dispute with Apple Inc., demonstrates the industry's rapid consolidation and shows just how valuable its companies' intellectual-property portfolios can be.

The world's semi-conductor market was worth US$412-billion in 2017, up 22 per cent from 2016, the Semiconductor Industry Association says. And a combined Broadcom-Qualcomm could jockey with the likes of Intel Corp. and Samsung Electronics Co. Ltd. as one of the world's top-three semi-conductor suppliers, with the leading position in markets such as WiFi chips, according to tech-market-intelligence firm ABI Research. As the smartphone market has matured and manufacturers have consolidated, semi-conductor makers have required increasing scale and massive research-and-development budgets to keep up with both chip competitors and the ever-evolving mobile market.

This, said Stuart Carlaw, ABI's chief research officer, has driven a need for scale that's geared up the industry's intense consolidation; Qualcomm itself, for instance, is still working through its own attempted acquisition of Netherlands-based rival NXP Semiconductors NV, worth about US$38-billion.

The bid's massive Qualcomm valuation would also price in its intellectual property, the licensing revenues from which can be very lucrative. The company is also positioned to take a large chunk of the forthcoming 5G wireless market. "They've got a very strong portfolio that talks directly to where we see the industry going," Mr. Carlaw says.

Qualcomm's product lines include the base-band chips currently used in Apple's iPhones – although a research note from Nomura Instinet on Monday suggested the massive Cupertino, Calif.-based company might shift to Intel chips later this year. The report sank Qualcomm's Nasdaq-listed stock on Monday – as other stocks took a battering in a day of volatile trading – despite news of the heightened takeover bid. It closed at US$64.40 on Tuesday.

The US$82 Monday offer for Qualcomm includes US$60 in cash and the remainder in Broadcom shares for each Qualcomm share. Qualcomm had also called the earlier US$70-a-share offer "opportunistic," in part because of its continuing dispute with Apple over intellectual-property royalties, which has dragged down its share price. Since early last year, the two companies have been entangled in lawsuits and trade complaints over royalties to license the chip maker's tech in Apple's phones.

Qualcomm faces a struggle on another front: finalizing its acquisition of NXP. Broadcom's offer is contingent on the the deal going through. The NXP deal, first agreed to in 2016, was endangered in December when activist shareholder Elliott Management Corp. argued Qualcomm's US$110 bid was too low, suggesting NXP was worth US$135 a share and itself accusing Qualcomm of being "opportunistic" when NXP's stock price was trading low because of "anomalies" in 2016. Shareholders will meet on March 6 to discuss what Broadcom said was "its best and final offer." Stifel analyst Kevin Cassidy said in an e-mail that the decision will come down to their faith in Qualcomm's earnings projections. In a January letter to stockholders, management said it was "firmly committed to delivering" non-GAAP earnings-per-share (EPS) of US$6.75 to US$7.50 by fiscal-year 2019, with help from the NXP acquisition and a US$1-billion targeted reduction in operating costs.

Mr. Cassidy increased his target price to US$82 and said in a research note on Monday that Qualcomm could continue gaining market share in mobile phones, but that the company's target EPS range was "not credible" unless it completes the NXP acquisition and resolves its licensing disputes. If the company can pull that off, he wrote, "we continue to believe Qualcomm's revenue has potential upside from licensing revenue."

Similarly, RBC Dominion Securities analysts said in late January, when Qualcomm reported its most recent quarterly financial results, the company "was able to provide some degree of comfort on ongoing litigations/uncertainties."

The merger, if approved by shareholders, would still face a battle on another front: competition. In January, the U.S. Federal Trade Commission filed a complaint in federal court alleging Qualcomm's dominance in the base-band-processor market for mobile devices was aided by "anti-competitive tactics." Further concentrating the processor marketplace could only fuel anti-competition arguments further.

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