Economy

Government Calls Broadcom's Bid for Qualcomm a National Security Risk

Government Calls Broadcom's Bid for Qualcomm a National Security Risk

The order by the Committee on Foreign Investment in the United States (CFIUS), which reviews deals that have potential national security implications, heightened tensions between the two companies that have been apparent since China-based Broadcom first proposed buying Qualcomm in November 2017 in what would be by far the largest deal in tech history.

"This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm", the USA treasury department, which oversees CFIUS, said in a statement.

"Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm's Annual Meeting 48 hours before it was to take place", it said in the statement.

Qualcomm is one of the leading players in the build-up to 5G networks (in partnership with Nokia), Huawei is the main competitor.

Additionally, US officials speaking on condition of anonymity said members of Congress and Federal Communications Commission officials were concerned that Broadcom could sell part of Qualcomm to a Chinese firm. Still, the deal cant go on without an okay from CFIUS (and later other regulatory bodies will get involved too). Instead, Broadcom has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm's 11-member board.

More news: Oscars 2018: 'The Shape of Water' wins Best Picture

CFIUS a year ago opposed the takeover of USA semiconductor manufacturer Lattice by a Chinese state group backed by a U.S. investment fund, and President Donald Trump then blocked the deal.

But Qualcomm, in a media statement, said that "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact" and that Broadcom had been interacting with CFIUS "for weeks". But time is not precisely on Broadcom's side.

Some of the concerns relate to risks associated with Broadcom's relationships with third party foreign entities, Aimen N. Mir, Deputy Assistant Secretary for Investment Security said in the letter, dated March 5 and released by Qualcomm on Tuesday. The company points out that its CEO is an American, it's in the process of moving its headquarters to the United States, and it and Qualcomm have institutional shareholders in common.

Left-leaning analysts see this all as ironic.


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