Why Trump Blocked Broadcom’s Hostile Takeover Attempts of Qualcomm | NTK Network Why Trump Blocked Broadcom’s Hostile Takeover Attempts of Qualcomm

Why Trump Blocked Broadcom’s Hostile Takeover Attempts of Qualcomm

The decision protects U.S. national security and prevents foreign dominance of critical 5G wireless technology.

By NTK Staff | 03.13.2018 @2:00pm

The Trump administration announced Tuesday that it would block the hostile takeover of chipmaker Qualcomm by Singapore-based Broadcom on national security grounds.

The decision came after a review by the Committee on Foreign Investment in the United States (CFIUS), which includes key administration officials from 16 departments, including Treasury, Defense, State, Commerce, and Homeland Security.

Broadcom’s proposal was rejected despite the company’s offer to move its headquarters back to the U.S. The risk of ceding cutting-edge technologies that Qualcomm provides, like wireless 5G and future iterations of similar technology, to foreign competitors was too great, according to the Trump administration.

The threat of China factored heavily into the U.S. government’s decision to block Broadcom’s proposed buyout of Qualcomm.

President Donald Trump, for his part, officially declared on Monday that the proposed $117 billion deal was prohibited on national security grounds. The president said in his order that “there is credible evidence” leading him to believe that Broadcom through control of San Diego-based Qualcomm “might take action that threatens to impair the national security of the United States.”

How might the Broadcom buyout impact national security?

“The case that has been constructed is that, given Broadcom’s business practices, the worry is that they will cut investment significantly, particularly in the 5G roadmap, weaken Qualcomm, as well as the U.S. position and allow Huawei, a Chinese company, to take the lead,” chip analyst Stacy Rasgon of Bernstein explained to CNBC.

Huawei, according to the Treasury Department, is a competitive threat in the development of 5G. If Broadcom, which has deep ties to Huawei, were to acquire Qualcomm and shut down its research and development efforts, a practice Broadcom has used in the past, it could give Huawei the edge it needs to become the global leader in wireless technology.

That was a risk the White House wasn’t willing to take.

Sign Up

for NTK updates every week.

View Privacy Policy