According to The Wall Street Journal, United States (US) President Donald Trump on Monday (12 March) decided to block the microchip maker Broadcom Ltd.’s $117 billion buyout of Qualcomm. The hostile bid by the Singapore based chipmaking behemoth for Qualcomm Inc. was thwarted by Trump on the grounds that it will impair the national security of the United States. If the deal had come through it would have been the second-biggest deal in American corporate history.
“The proposed takeover of Qualcomm by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited,” the presidential order released on Monday said.
This is a latest in a series of moves by the Trump administration seen as part of his larger China containment strategy.
Trump has stated in his order that he was in possession of credible evidence that led him to conclude that Broadcom through control of Qualcomm "might take action that threatens to impair the national security of the United States."
The Committee on Foreign Investment in the US (CFIUS), a panel entrusted with the responsibility of scrutinising foreign deals had earlier noted that bid could have had significant implications for the U.S.’s technological race with China. The panel expressed apprehension that Broadcom, known for its ruthless focus on cost cutting, would stymie research and development at Qualcomm. The panel also noted that the if the acquisition comes through US will stand to lose against foreign competition in the race to develop next-generation wireless technology 5G and enable Chinese players like Huawei Technologies to dominate the space.
In a letter last week to lawyers involved in the proposed deal, US Treasury Department had said that Qualcomm was trusted by the U.S. government and identified Huawei as a competitive threat in the development of 5G. “Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States,” the letter said.
Qualcomm is widely credited with inventing the 2G and 3G wireless network technology. Currently it is a niche player focussed on building mobile chips in smartphones and the radios that enable cellular communications.
Broadcom in an official statement said that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”
This is the second time Trump has exercised his option of blocking a business deal based on CFIUS objections. Earlier he had blocked the Chinese government-backed Canyon Bridge Capital Partners’ attempt to acquire Lattice Semiconductor Corp.