Commissioner Margrethe Vestager, in charge of competition policy, said: “Thanks to very good cooperation with the companies the Commission has been able to approve this multi-billion dollar takeover within a very short space of time while preserving effective competition in this crucial high-technology sector. "
Both Avago and Broadcom are manufacturers of semiconductors at the global level. These are materials that conduct electricity more easily than insulators (like glass) but less easily than conductors (like copper), which makes them ideal for manipulating electronic signals (reversing, amplifying, weakening etc.). Semiconductor materials, most typically silicon, are used in semiconductor devices like microchips and their components (for example diodes and transistors). These devices are then used in a wide-range of products such as mobile phones, computers, domestic appliances, cars, medical equipment, identification systems, large-scale industry electronics and aerospace equipment.
The Commission's investigation showed that the portfolios of the companies are mainly complementary since Broadcom makes "off-the-shelf" chips for the broadband and connectivity market segments, while Avago makes custom-built chips for special applications in the analog wireless integrated circuits, enterprise, storage and industrial segments.
Nevertheless, the Commission had some concerns about the vertical relationship created by the transaction, since Avago supplies certain intellectual property (technology for allowing fast data transmission between chips) to some of Broadcom's competitors. The Commission's concern was that after the takeover Avago could have had an incentive to withhold this intellectual property in order to extend the merged entity's leading market position in the so-called "switch chips" market.
However, already during the Commission's assessment of the case, Avago addressed these concerns by entering into commercial agreements with other "switch chip" manufacturers. These agreements will ensure that other "switch chip" manufacturers will continue to have access to the necessary intellectual property on reasonable terms. Thanks to this up-front solution, the Commission has been able to unconditionally clear the proposed transaction, which was notified on 2 October 2015.
Companies and products
Avago, based in Singapore, designs, manufactures, markets and sells a range of semiconductors for use in wireline and wireless communications, storage applications and industrial applications.
Broadcom, based in the United States, supplies semiconductors solutions for wireline and wireless communications.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days (35 working days if commitments are offered) to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
The transaction was examined under the normal merger review procedure. More information is available on the Commission's competition website, in the public case register under the case number M.7686.