YOU ARE AT:5GTrump plays national security card to block Broadcom's bid for Qualcomm

Trump plays national security card to block Broadcom’s bid for Qualcomm

Move to block hostile takeover of Qualcomm seems pinned to concerns about Chinese technology ambitions

After the Department of Treasury’s Committee on Foreign Investment in the U.S. ordered Qualcomm to scrap a March 6 annual shareholder’s meeting to allow for a review of Broadcom’s more than $100 billion bid to acquire Qualcomm, President Trump on Monday officially stopped the back-and-forth with a presidential order.

Trump wrote in the order, “There is credible evidence that leads me to believe that Broadcom Limited, a limited company organized under the laws of Singapore (Broadcom), along with its partners, subsidiaries, or affiliates, including Broadcom Corporation, a California corporation, and Broadcom Cayman L.P., a Cayman Islands limited partnership, and their partners, subsidiaries, or affiliates (together, the Purchaser), through exercising control of Qualcomm Incorporated (Qualcomm), a Delaware corporation, might take action that threatens to impair the national security of the United States.”

While Broadcom is currently based in Singapore it has a physical presence in the U.S., and has said had the deal gone through it would “re-domicile” to the U.S. In a brief note to investors, the company said it “is reviewing the order” and “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”

Treasury Secretary Steve Mnuchin, also chair of CFIUS, said in a statement, “This decision is based on the facts and national security sensitivities related to this particular transaction only and is not intended to make any other statement about Broadcom or its employees, including its thousands of hard working and highly skilled U.S. employees. The CFIUS process focuses exclusively on identifying and addressing national security concerns. This focused mandate reinforces our commitment to welcoming foreign investment, while at the same time reinforcing our commitment to protecting national security.”

“This should be viewed as a very positive event not only for Qualcomm but also for the market as a whole,” Stuart Carlaw, chief research officer at ABI Research, said. “The combined entity would have had dangerously dominant positions in some core markets such as location technologies, Wi-Fi, Bluetooth, RF hardware and automotive semiconductors. A diverse supplier ecosystem will be key to supporting the IoT as well as vertical market developments such as smart mobility and smart manufacturing.”

The national security concern here is related to ceding U.S. dominance in the semiconductor and attendant technologies to Chinese interests, particularly Huawei. In a March 5 letter from CFIUS to attorneys for Qualcomm and Broadcom, CFIUS members called out “well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States.”

While officials have long been weary of Huawei based on a perception of close alignment with the Chinese government, the telecom infrastructure and device vendor seems to be the subject of a heightened level of scrutiny at the moment.

Earlier this year both Verizon and AT&T, reportedly facing pressure from lawmakers, backed out of deals to sell Huawei devices in the U.S. market. Similarly, there are House and Senate bills that, if approved, would prohibit the U.S. government from doing any business with Huawei or ZTE, another Chinese telecom infrastructure vendor.

 

ABOUT AUTHOR

Sean Kinney, Editor in Chief
Sean Kinney, Editor in Chief
Sean focuses on multiple subject areas including 5G, Open RAN, hybrid cloud, edge computing, and Industry 4.0. He also hosts Arden Media's podcast Will 5G Change the World? Prior to his work at RCR, Sean studied journalism and literature at the University of Mississippi then spent six years based in Key West, Florida, working as a reporter for the Miami Herald Media Company. He currently lives in Fayetteville, Arkansas.

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