Thursday, 22 August, 2019

Trump blocks Broadcom's acquisition of Qualcomm on national security grounds

National Security Concerns Means the Broadcom Bid to Acquire Qualcomm Has Been Temporarily Stopped President Donald Trump Just Killed Broadcom's Proposed Takeover of Qualcomm
Pablo Mccormick | 14 March, 2018, 00:20

The deal, which would have been the biggest technology acquisition in history, was thwarted by a presidential order issued on March 12, over fears that it would "impair the national security of the United States".

"This decision is based on the facts and national security sensitivities related to this particular transaction only and is not meant to make any other statement about Broadcom or its employees, including its thousands of hardworking and highly skilled United States employees", Mnuchin said.

Broadcom Ltd Chief Executive Hock Tan is unlikely to slow his acquisition spree after U.S. President Donald Trump blocked the microchip maker's $117 billion bid for Qualcomm Inc on national security grounds, analysts said on Tuesday.

But the United States is anxious that a takeover would dramatically reduce investment and research at Qualcomm, giving an advantage to China. The agency believes that the acquisition would give a foreign entity control of a US business.

The cancellation has deep ramifications for the entire tech sector, especially since the Administration's reason for it was fear of China taking vital USA technology from a Singapore company.

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If the takeover had taken place, the new group would have been the world's third-biggest chipmaker after Samsung (KRX: 005930) and Intel (NASDAQ: INTC).

Had the deal gone ahead, a merged Broadcom and Qualcomm would have been responsible for a massive proportion of the chips in phones, computers and connected devices. Well, other than advancing 5G technology development at a rapid pace. Broadcom is better known for selling assets and growing through acquisitions rather than R&D.

To give an idea of Huawei's rising clout, the tech company past year posted sales of 600 billion yuan ($95 billion).

For the past few months, there's been a will-they-won't-they dance going on between Qualcomm and Broadcom. Mario Morales at IDC told the BBC that every major country around the world is in a race to deliver 5G technology.

Across the table, Qualcomm got exactly what it wanted and can now focus on its pending merger with NXP Semiconductors (NASDAQ: NXPI).

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"The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover", reads the presidential order.

Broadcom meanwhile is working to address the concerns that its acquisition will pose a security risk.

Broadcom, for its part, tried to circumvent the opposition by shifting its corporate headquarters from Singapore to the United States, which would make it a USA company and no longer subject to CFIUS's overview.

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. At least a half-dozen technology deals have collapsed during the Trump administration in the face of CFIUS concerns. In fact, reports last week said Intel was waiting to see the Broadcom deal fall through so that it could move forward with its own acquisition plans.

The Trump administration nevertheless balked at the prospect of a prominent US chipmaker being owned by a foreign company, particularly at a time countries around the world are gearing up to build ultra-fast "5G" mobile networks that could tip the balance of power in technology.

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