San Francisco: US President Donald Trump blocked an unsolicited bid by Singapore-based Broadcom to take over smartphone chipmaker Qualcomm, citing national security concerns. That panel, the Committee on Foreign Investment in the US, known as CFIUS, said it was anxious that Broadcom would stymie research and development at Qualcomm given its reputation as a cost-cutting behemoth. A takeover of Qualcomm by Broadcom would have created the world's third-largest maker of microchips, behind Intel and Samsung.
CFIUS, which raised concerns about the Qualcomm deal with Trump, listed the highly leveraged nature of Broadcom's bid for its larger rival as a major concern coupled with the risk of the USA losing mobile technology leadership.
Analysts said Broadcom can still build heft through smaller deals.
Analysts said Broadcom can still build heft through smaller deals and could have an easier time buying USA targets if it goes through with plans to redomicile in the US.
"A shift to Chinese dominance in 5G would have substantial negative national security consequences for the US", CFIUS said.
Sources added that Broadcom will continue with its plan to relocate to the US.
London spoke with SiriusXM's Breitbart News Tonight's co-hosts Rebecca Mansour and Joel Pollak on Monday, describing China as having "the edge" over the USA due to the one-party state's focus on substantive technological innovation over endeavors such as Facebook and Snapchat. He described the CFIUS communication to Broadcom as "unprecedented".
This is the fifth time a U.S. president has blocked a deal based on CFIUS objections and the second deal Mr Trump has stopped since assuming office.
Qualcomm has emerged as one of the biggest competitors to China's Huawei Technologies Co in the sector, making Qualcomm a prized asset. A bipartisan group of 22 House members led by Rep. Robert Pittenger (R., N.C.) - who, along with Senate Majority Whip John Cornyn of Texas has introduced a bill to expand CFIUS's jurisdiction - wrote to the panel in December 2016 to flag the transaction. That could leave the US hobbled in the race to develop next generation, 5G wireless technology, according to people familiar with the matter.
Mr. Trump blocked the deal in September after CFIUS said it raised national-security concerns.
The move had little precedent.
Only five takeovers of American firms have been blocked by US presidents on national security grounds since 1990. The committee also said that the technology of Qualcomm-which makes wireless chips and licenses wireless patents crucial to smartphones and other-was too important to put into the hands of a foreign company with links to China.
Trump's order came as Broadcom was in the midst of moving its headquarters from Singapore to the U.S. Broadcom announced the move in November after its CEO Hock Tan met with Trump at the White House. Tan "a great, great executive" and said Broadcom was "one of the really great, great companies".
"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. "There may be avenues for the companies to work together in other kinds of arrangements, but anything that looks like Broadcom controls Qualcomm, especially around the 5G business, CFIUS will be alert to".
Shares of Broadcom were last up 1.4 per cent in midday trading.
This item was corrected at 12:32 p.m. ET on Tues., March 13, 2018 to show that A bipartisan group of 22 House members wrote to the Committee on Foreign Investment in the U.S.in December 2016, not December of a year ago.
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