Hock Tan seems to have had more than a photo op in mind with his visit to the White House this week. Fresh off announcing alongside President Donald Trump that the chipmaker he leads, Broadcom, would relocate to the United States, the chief executive is weighing a $100 billion bid for rival Qualcomm, Bloomberg reported on Friday. The industry is consolidating at a moment when patent and regulatory woes make the target vulnerable. An exuberant market reaction could seal the deal.

Tan is a consummate dealmaker. His Avago Technologies, which traces its roots to the semiconductor division of the old Hewlett-Packard, paid $6.6 billion in 2013 for LSI, a larger maker of networking and flash-memory chips. Two years later it expanded into wireless by buying Broadcom for $37 billion and adopted its name. Analysts expect the company to post a 33 percent rise in sales for the year ended Oct. 31, and a 40 percent jump in earnings. That growth powered the stock up by 55 percent so far this year, valuing the company at $105 billion.

Meanwhile, once high-flying Qualcomm has stumbled. Most smartphones use its chips or technology to connect to wireless networks, and that dominance has come back to bite it. In January, the U.S. Federal Trade Commission alleged the company abused its clout to charge high royalty rates for its technology. And Apple subsequently filed a $1 billion suit claiming Qualcomm was withholding royalty rebates.

The company sought to revive growth with a $47 billion bid for Netherlands-based NXP Semiconductors last year, but European regulators have yet to approve the deal and activist hedge fund Elliott Management is campaigning to force it to pay more. Qualcomm’s stock fell 22 percent in the first 10 months of this year, making it look more like a target than an acquirer.

Pressure to merge is growing in the sector as firms look to gain scale at a time when advances in chip technology are slowing and becoming more expensive to achieve. Investors are clearly telegraphing their inclination. Broadcom’s shares surged 5 percent, an unusual reaction to what would be the industry’s largest takeover. With applause like that, Tan's unlikely to let his highly rated stock go to waste.

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CONTEXT NEWS

- Broadcom is considering making a takeover offer for Qualcomm that would value the chipmaker at more than $100 billion, Bloomberg reported on Nov. 3, citing people familiar with the matter.

- On Nov. 2, Chief Executive Hock Tan appeared at the White House with President Donald Trump to announce that Broadcom would change its domicile to the United States from Singapore.

- Shares in Broadcom, which makes semiconductors for networking and wireless equipment, were up nearly 5 percent in afternoon trading on the Nasdaq. Qualcomm, a major supplier of chips for wireless handsets, was up 14 percent.

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(Editing by Rob Cox and Martin Langfield)

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