The presidential order reflected a calculation that the United States' lead in creating technology and setting standards for the next generation of mobile cell phone communications would be lost to China if Singapore-based Broadcom took over San Diego-based Qualcomm, according to a White House official, reports reuters.
We recently reported how Intel Corporation is considering making a bid to acquire the Singapore-based chip manufacturer Broadcom, who in turn is looking to buy its rival chipmaker, Qualcomm.
Broadcomsaid in a statement it was reviewing the order and that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns". Broadcom played its own game of carrot and stick, with an improved share price offer, but also offered its own proposed board of directors slate to shareholders in a move meant to launch a hostile takeover.
Broadcom and Qualcomm are also ordered to certify in writing to the Committee on Foreign Investment in the United States (CFIUS) that they have taken all steps to abandon the merger.
Of course, Qualcomm has done a great job of positioning itself as an early leader in 5G technology, one of the things that made it attractive to Broadcom and the reason the USA government ultimately decided it shouldn't fall into foreign ownership.
Qualcomm has confirmed it has received the notice, while Broadcom has yet to respond to TechRadar Pro's requests for comment. "Articulation of the potential national security concerns, in significant part, is classified".
The takeover had already been under investigation by the Committee on Foreign Investment in the US (CFIUS), which stated that Broadcom had spent six times as much on acquisitions than development over the past 12 years and that it underinvested in long term product development.
Keep in mind that the decision from Donald Trump can not be appealed since it is a presidential order, and Broadcom's executives have not stated their intentions on what they will end up doing next.
Huawei earlier this year lost a bid for broader entry into the U.S. smartphone market when AT&T and Verizon canceled deals after USA lawmakers expressed concern over the company's Chinese government ties. "This expertise and R&D expenditure, in turn, drive USA leadership in key standard-setting bodies, and Qualcomm has been a leading participant in standards setting for 3G and 4G".
Broadcom is likely to remain acquisitive, but will pursue smaller chip firms, Wall Street analysts said Tuesday.
The inter-agency body claimed that a decrease in R&D would specifically hit 5G, a field led by Qualcomm and Huawei.
Meanwhile, Broadcom announced today that is has accelerated its timetable for redomiciling its organization from Singapore to the USA, moving up the date from May 6 to April 3. Both companies are dubbed as big players in the chip manufacturing industry, however, Qualcomm's business model also includes telecom equipment.
It is a highly unusual move by a President.
"It's a real threat", said James Lewis, a former United States national security official who is now vice president at the Center for Strategic and International Studies in Washington. But now that Broadcom's pursuit has been permanently blocked due to national security concerns, it's worth remembering that Qualcomm is a company with serious problems and an uncertain future.
Later, in part (e) the USA government ordered that "The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover".
"It is not that rare for the government to block acquisitions, said Avi Greengart, research director for connsumer platforms and devices at GlobalData".
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