Trump blocks Broadcom's Qualcomm takeover on national security grounds

Katrina Barker
March 14, 2018

President Trump's decision yesterday to effectively block Broadcom's $117 billion proposed takeover of Qualcomm on national security grounds confirmed what had become increasingly apparent in recent days - that the U.S. authorities had taken a dim view of the deal and the prospect of a foreign company buying America's undoubted leader in wireless technology. He previously adopted the same approach when blocking the sale of United States technology firm Lattice Semiconductors to Chinese-backed company Canyon Bridge Capital Partners in September 2017, citing national security risks again.

Trump on Monday blocked Broadcom's effort to buy Qualcomm on national security grounds, ending what would have been the technology industry's biggest deal ever amid concerns that it would give China the upper hand in mobile communications.

Broadcom could not be immediately reached for comment. Lawmakers accused the company of having close links to Beijing, and said it posed a threat to United States national security. Indeed, as the Wall Street Journal noted in a lengthy article, Qualcomm likely now will face more challenges in its largest market: China. "US national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation", the chip maker said in a statement. The latter is something that Xiaomi has been heavily focused on as it has eyed a possible United States launch, picking up a large portfolio in 2016 from Microsoft.

It also holds key patents which earn massive royalty payments from phone makers, such as Apple.

Senate Minority Leader Chuck Schumer (D-NY) speaks after the Senate Democratic weekly policy luncheon on Capitol Hill in Washington, U.S., March 6, 2018. There were concerns the takeover could have led to China pulling ahead in the development of 5G wireless technology.

The staff at Qualcomm's offices are likely breathing a sigh of relief at the governmental intervention, given that the Snapdragon manufacturer was doing its best to resist the takeover, claiming that it was undervalued.

Being based in the United States as opposed to Singapore will allow Broadcom to make what it believes will be acquisitions of US companies that will not fall within the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security concerns.

The decision didn't come as a surprise.

Among the flashpoints in the proposed Qualcomm deal was the rollout of 5G wireless technologies that are expected to play a key role in connecting billions of Internet of Things devices. Broadcom made an unsolicited bid previous year to take over Qualcomm, which has been met by shareholder skepticism and regulatory scrutiny on security and antitrust grounds. The company also added that the agency had formerly evaluated and cleared its purchase of Brocade in November a year ago and it is at the close of that transaction that Broadcom had agreed to redomicile to the US.

Trump, in his rejection of the Qualcomm acquisition, wrote, "The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected (sic) directly or indirectly, is also prohibited".

Other reports by AllAboutTopnews

Discuss This Article