Broadcom’s Bid for Qualcomm Blocked Over Security Issues

Citing national security concerns, President Donald Trump has put the brakes on Singapore-based Broadcom’s attempt to acquire rival chipmaker Qualcomm. The companies were ordered to abandon the $117 billion acquisition bid and dismiss any proposals for Broadcom’s candidates to run for seats on Qualcomm’s board. Had it been approved, the purchase would have marked the largest tech deal of its kind. Broadcom says it “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”

According to the presidential order: “The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited.”

The Committee on Foreign Investment in the United States (CFIUS) submitted a letter to lawyers for the two companies claiming that Broadcom “had repeatedly violated one of its orders in its pursuit of Qualcomm,” reports The Wall Street Journal, “and that its investigation ‘so far’ confirmed the national-security risks it had previously identified with the proposed merger.”


“CFIUS already said it was worried that Broadcom, which has a reputation as a cost-cutting behemoth, would stymie research and development at Qualcomm, the San Diego-based chipmaker, and weaken it against foreign rivals racing to develop next-generation wireless technology, such as China’s Huawei Technologies.”

The letter explains that CFIUS accelerated the investigation due to Broadcom’s violations of the initial order. The Committee gave both companies a March 12th deadline to submit additional information. The letter stipulated that “…the parties will likely not have an additional opportunity to submit information thereafter.”

In September, President Trump “blocked Chinese government-backed Canyon Bridge Capital Partners’ attempt to buy Portland, Oregon-based Lattice Semiconductor Corp.,” explains WSJ as an example of how rare it is for a president not to take a CFIUS recommendation seriously. “In an unusually public fight to try to save their deal, the companies made the rare, direct appeal to Mr. Trump. He sided with CFIUS’s earlier negative recommendation.”

Attempts by Broadcom and its chief executive Hock Tan to win favor with President Trump, including a proposal to redomicile the company to the U.S., seem to have not swayed the decision regarding Qualcomm.

In a March 5th letter to the companies’ lawyers, CFIUS wrote, “Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G [next-generation cellphone technology] would have substantial negative national security consequences for the United States.”

The Los Angeles Times suggests that the decision could affect the tech industry’s relationship with Beijing. U.S. companies have traditionally acquiesced “to Beijing’s demands for technology and censorship,” notes the LA Times. “For years, that approach has gone largely unchallenged, creating conditions in which companies such as Apple have little choice but to submit to China’s calls to store customer data on its soil, and IBM and Intel to share technology with Chinese partners.”

“But the latest protectionist move from the White House — which last week announced tariffs on imported steel and aluminum — could signal a reshaping of America’s tech relationship with China.”