Broadcom's proposed Qualcomm bid blocked on security grounds
- Author: Arturo Norris Mar 13, 2018,
Mar 13, 2018, 14:01
China is said to be the main reason behind Trump's decision, U.S. daily "The New York Times" said.
Broadcom said it is attempting to establish its headquarters in the United States by April, a process it calls redomiciliation, which it says will render it an American company and allay any national security concerns.
The order came following Broadcom's moves to speed up the relocation of its corporate headquarters from Singapore to the US - which could have derailed the jurisdiction of the Committee for Foreign Investment in the U.S.to investigate the potential deal for national security risks.
CFIUS was not buying that, nor did it like the idea that Broadcom thought it could just move back the United States and set up shop.
Despite the deal's relatively small US$15 million price tag, Naura's success in getting the nod from CFIUS is notable.
The Trump administration is concerned about the USA losing ground in 5G technology, the latest iteration of wireless technology, which is expected to greatly improve wireless networks and prove essential to the next generation of self-driving cars as well as other technologies.
Congressman Duncan Hunter said that the merger would "damage American security" and had pointed at Broadcom's "increasing" ties with China to highlight his reservation about the deal. That was just the fourth time in a quarter century that a USA president stopped a foreign takeover of an American firm on national security grounds. Qualcomm is being hurt by weakening demand for smartphones and the company's profit-generating licensing unit has been hit with regulatory fines around the world and a challenge from Apple, one of its largest customers, which has stopped paying up as the two prepare to battle in the courts.
It would also have been the biggest takeover in the technology sector. Broadcom is owned by foreigners. It is being highly publicised.
Though Broadcom is based in Singapore, the principal worry rests with China.
If Broadcom decides to press on with its effort to buy Qualcomm, it would be wise to drop the matter for now while the company quietly wraps up its move to the United States, a second CFIUS expert said.
To be sure, deals today take longer to get done because of geopolitical complexities. Trump's declaration on March 12 is a likely result of that review.
"The Chinese are stealing everything that we have right now".
Much of the decline was attributable to Beijing's regulatory crackdown on outbound capital flows, the report said. Within months it also acquired switch maker Brocade. CFIUS listed several issues, including Broadcom's reputation for cutting research spending and potential national security risks.
While the Singapore-based Broadcom conducts the majority of its business in the U.S., and is even looking to move its operations to that market, reports suggesr that Trump's decision is an attempt to thwart China's bid to gain market advantages by doing deals with USA firms.
CFIUS said Broadcom gave it just three hours notice before seeking on Singapore hearing. The company says it supports the CFIUS review.