US Presidential Order Prevents Broadcom From Acquiring Qualcomm

Randolph Lopez
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 United States authorities had taken a dim view of the deal and the prospect of a foreign company buying America's undoubted leader in wireless technology. If Intel were to acquire Broadcom, the semiconductor maker would gain entry into a market that it has been struggling to find a toe-hold in - wireless handsets. For instance, Qualcomm is viewed as being ahead of the curve in the development of next-generation 5G wireless technology, and the US government likely thinks that ceding control to Broadcom could allow Chinese companies such as Huawei to become leaders in this crucial space going forward. It sees 5G as a fresh start to make a bigger mark in the mobile world, but likely didn't want to compete against the combined might of Broadcom and Qualcomm.

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.

While CFIUS cited Qualcomm's government contract work as an area it was looking at, it also made broader accusations about Broadcom's commitment to spending on new technology that's important to US leadership in the technology industry. Broadcom is known for cutting R&D to boost short-term profits.

What makes Trump's action surprising, however, is that Broadcom is not a Chinese company - it's headquartered in Singapore - and in fact is in the process of redomiciling to the US.

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To give an idea of Huawei's rising clout, the tech company a year ago posted sales of 600 billion yuan ($95 billion). It was hard to find a single person who thought the Broadcom deal should have gone through, outside of Broadcom itself, and allegedly for increased national security, the deal simply couldn't have happened.

The Singapore-based Broadcom has been trying to acquire fellow chipmaker Qualcomm for the past several months, but the proposed merger was met with constant rebuttals. President Trump has placed an order blocking the takeover, due to some security concerns. Of course, Broadcom "strongly disagrees" with the assessment that the acquisition poses national security risks, and has stated that it is reviewing the order. Broadcom is now in the process of moving its headquarters from Singapore to the US, a move expected to be complete by April 3. If Broadcom fails to get approval even after shifting the headquarters, then the company would possibly take the matter to court.

Today's order was not the first time that the Trump administration has impeded a major takeover deal.

"This decision hangs a huge "not-for-sale" sign on just about every American semiconductor firm", he added. Even Barack Obama blocked a technology acquisition by a Chinese investment fund citing similar concerns, notes the BBC. AT&T, reportedly under political pressure, dropped out from a deal with Huawei at the last minute to distribute Huawei's new Mate 10 Pro phones in the U.S.

Other reports by GlobalViralNews

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