June 19, 2018

US President signs order blocking Broadcom from buying Qualcomm

14 March 2018, 12:06 | Lorenzo Hawkins

Getty Images

Getty Images

Donald Trump has quashed Singaporean chipmaker Broadcom's proposed takeover of USA rival Qualcomm, pointing to concerns about national security.

The order cited "credible evidence" that led Trump to believe that Broadcom's taking control of Qualcomm "might take action that threatens to impair the national security of the United States".

The government said it feared Broadcom would cut investment in research and development to increase short-term profits.

The Treasury Department said in a letter over the weekend that Broadcom had violated a Committee on Foreign Investment in the USA order on three separate occasions by failing to give advance notice before taking actions such as lodging takeover-related securities filings in the United States. But Trump has ordered both firms to immediately abandon the sale. It also said that it moved its 2018 annual shareholder meeting to March 23, 2018 in order to comply with the order.

In a statement yesterday, Broadcom said it is reviewing the order and "strongly disagrees" that its proposed acquisition raises any national security concerns.

Huawei is also Qualcomm's main rival when it comes to developing technology for the emerging 5G standard. The chips also connect smart phones as well as other electronic devices to Wi-Fi connections. These chipsets enable connected cars to speak to each other as well as stoplights. It is far better for the technology industry that Qualcomm continues.

Trump's order is in line with the administration's protectionist instincts.

Chris Caso, an industry analyst with Raymond James, pointed out how brief the review of the deal was by U.S. Committee on Foreign Investment, and how rare it is for a U.S. president to intervene. At least a half-dozen technology deals have collapsed during the Trump administration in the face of CFIUS concerns.

The order marked an unprecedented move by the White House to stop a hostile bid for a company. Becoming an American entity would likely have prevented CFIUS from being able to block the deal. Deals between American companies fall out of CFIUS' jursidiction. CFIUS did not provide details on the matter. "If there is one lesson here, it's don't screw with the government", the person said. Unlike Qualcomm, Tan said, Broadcom financed its innovation through "lawful practices". "This feels a little more personal to me".

Qualcomm has confirmed it has received the notice, while Broadcom has yet to respond to TechRadar Pro's requests for comment. To be slightly more accurate, there's been a courtship of Warner Bros. proportions between the two firms, if the part of Qualcomm were played by Penelope Pussycat and the part of Broadcom by Pepé Le Pew. It is also to be noted that Broadcom is planning to move its headquarters to the United States, it would be interesting to see what rules will be followed by Broadcom in doing so, and how is Trump administration going to take it.

117 billion dream of picking up Qualcomm (NASDAQ: QCOM) in a hostile takeover is no more.

Sources familiar with the matter previously said that Qualcomm does sensitive work for the US government, which concerns lawyers and officials saying that Broadcom could sell parts of Qualcomm to weaken the U.S.'s race to 5G technology.

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