Presidential order bans Broadcom's proposed acquisition of Qualcomm
- Author: Ryan Wade Mar 14, 2018,
Mar 14, 2018, 0:23
"There is credible evidence ... that Broadcom ... through exercising control of Qualcomm ... might take action that threatens to impair the national security of the United States", the order explains.
Congressman Duncan Hunter said that the merger would "damage American security" and had pointed at Broadcoms "increasing" ties with China to highlight his reservation about the deal.
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U.S. regulators have in recent weeks expressed concerns that the takeover could cause the United States to fall behind China in the race to develop 5G networks. The concerns appear primarily to be on the role of the companies (and national interests) in the future development of technology in the mobile sector, especially regarding R&D into 5G technology. Whether Intel lobbied in favor of blocking the Qualcomm-Broadcom deal or not, it can join Qualcomm in celebrating its failure.
Qualcomm announced late on Monday that the new meeting date will be March 23, and that the six Broadcom-backed candidates vying for spots on the 11 person board were off the ballot. However, things are looking less good for Apple, which backed Broadcom because it thought it could cut a deal with the company and not have to pay so much for Qualcomm technology. This will indirectly benefit Huawei, which is also in a race to develop the 5G wireless technology. Broadcom is better known for selling assets and growing through acquisitions rather than R&D.
Intel has already bought out a number of companies in the last few years, including Altera for $16.7 billion and auto component and sensor maker Mobileye for $15 billion. The order also bans Broadcom's nominees from standing for election to Qualcomm's board.
Qualcomm had also been hesitant in the offer because of its acquisition attempt for NXP Semiconductors.
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"Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns", the company said, adding that it was reviewing the order.
Broadcom meanwhile is working to address the concerns that its acquisition will pose a security risk.
One factor that may have pushed CFIUS to move quickly was a unusual maneuver by Broadcom to relocate to the United States.
Broadcom had sought to provide assurances it would continue investing in research after the takeover, but in a letter on Sunday sent to both companies CFIUS said Broadcom's actions had "so far" confirmed its national security concerns. Broadcom will be shifting its headquarters to the United States, and from there it will be deciding its next move.
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According to the letter from the Committee on Foreign Investment in the U.S., the takeover would pose too great a security risk. As per him, allowing an American technology company to be acquired by a foreign company would snatch its leadership in the semiconductor and wireless industry. If the acquisition was successful, Broadcom would have been able to push out its 5G technology even faster than anticipated.