Trump Blocks Deal Over National Security

The order issued by President Trump prohibits the proposed acquisition of the Delaware-based manufacturer Qualcomm by Broadcom, as well as "any substantially equivalent merger, acquisition, or takeover, whether affected directly or indirectly".

Broadcom's attempt to take control of rival chipmaker Qualcomm appears to have hit a tough barrier, as US President Donald Trump has weighed in with a presidential order forbidding any merger between the two companies.

"Details of the security risk are likely around 5G cellular technology [where] Qualcomm, in our view, is well ahead of foreign and domestic competitors", said Stifel analyst Kevin E. Cassidy in a report late Monday.

In such a scenario, Broadcom - which now works under the laws of Singapore - would have been considered as an American company and thus its proposed Dollars 117 billion would have been considered outside the preview of a federal agency - the Committee on Foreign Investment in the United States (CFIUS)? that reviews foreign deal. "There is credible evidence that leads me to believe that Broadcom Ltd., by acquiring Qualcomm, might take action that threatens to impair the national security of the United States".

"Broadcom, which is in all important respects a US company, has been repeatedly approved by CFIUS in its previous acquisitions of USA companies", the company said in its statement, "and has always engaged productively with CFIUS to ensure USA national security is protected". The takeover, which would have been the largest transaction the technology industry had ever seen, was tripped up by concerns that it posed a threat to American competitiveness in mobile technology by putting one of the largest mobile chip makers in the USA under the control of a company based in Asia. Qualcomm officials said the meeting would take place on March 23.

The deal was under scrutiny by a national security panel called the Committee on Foreign Investment in the United States, which advises Trump.

Though Broadcom is based in Singapore, the principal worry rests with China.

It is also ironic that the USA is blocking a takeover of Qualcomm out of fears for what it might mean for Chinese leadership in mobile, just when the San Diego based business is increasingly dependent on the Chinese market.

Broadcom, which had pledged to move all its headquarter functions to the U.S. if it won the day, said it "strongly disagreed" with the reasoning behind the decision.

A panel that advises the President on business deals that could affect national security, the Committee on Foreign Investment in the US, also feared the somewhat strong ties between Huawei and Broadcom.

"This should concern us as a nation". "What is unusual is blocking the sale on national security grounds for a non-defense-related company".

But there may be more to the decision than just Broadcom. As the U.S. and China maneuver for control over advanced technologies, it seems that the White House has deemed Qualcomm too important to have its R&D potentially slashed by Broadcom. "Better to keep it in American hands and protect American national security", Cotton said.

"Semiconductor technology and companies like Qualcomm will be an important weapon in that 5G arms race [and] the USA like other nations and regions want to be first", Morales told the BBC.

This is unedited, unformatted feed from the Press Trust of India wire.

  • Kyle Peterson