Broadcom to abandon Qualcomm bid post Donald Trump executive order

US President Donald Trump

US President Donald Trump

Trump has blocked the unsolicited $117-billion takeover bid of American chipmaker Qualcomm by Singapore-based rival Broadcom citing national security reasons. In February, he wrote to Treasury Secretary Steven Mnuchin saying Broadcom's bid to win control of Qualcomm's board at a March shareholders meeting should be examined by the Committee on Foreign Investment in the USA, according to a copy of the letter obtained by Bloomberg.

That could mean a significant reduction in spending on 5G research and development at Qualcomm, which totaled $5.5 billion in its most recent financial year.

Trump's successful move to kill the deal and CIFUS's intervention, however, doesn't just end Broadcom's bid to buy Qualcomm, but could also have a lasting effect on other American companies looking for worldwide growth.

The US Treasury Department warned in a letter made public in early March that since Broadcom was financing the deal with over $100 billion in debt, it would be under pressure to squeeze more profits out of Qualcomm. Trump's order, which follows an investigation by the Committee on Foreign Investment in the U.S. (CFIUS), also prohibited 15 of the candidates Broadcom had hoped to elect to the Qualcomm board as proxies at a March 6 shareholder meeting.

Industry analysts speculated that Qualcomm's advanced work on 5G technology was the reason for the government's move to block the deal.

Broadcom's ambitions sparked US government concerns over which country will dominate the technology, as well as fears over national security.


In 1990, President George H.W. Bush ordered China National Aero-Technology Import and Export Corp.to divest its stake in Mamco Manufacturing Co., an aerospace parts supplier based in the U.S.

Qualcomm and Huawei have already conducted joint tests on 5G technology, and both companies are part of an worldwide 5G alliance that includes Nokia, Ericsson and Intel.

By way of a quick recap, the months-long saga began in November when Qualcomm rejected a takeover offer from Broadcom.

Broadcom said earlier this year it would fully be a USA domiciled company by May 6.

Of course, these concerns about national security are mostly bogus.

"Over time that would mean US government and USA technology companies could lose a trusted US supplier that does not present the same national security counterintelligence risk that a Chinese supplier does", said Brian Fleming, an attorney at Miller & Chevalier and former counsel at the Justice Department's national security division. The Broadcom-Qualcomm deal is dead today, but who what could happen tomorrow and is way more worrisome.

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