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Broadcom ends bid for rival Qualcomm after Trump intervention

14 March 2018

"The White House said there was "credible evidence" that the bid by Singapore-based chip maker Broadcom may impair the national security of the United States".

USA regulators have in recent weeks expressed concerns that the takeover could cause the United States to fall behind China in the race to develop 5G networks.

In other words, Trump saw this as a threat to American innovation, perhaps a deliberate strategy to weaken our ability to develop commercial high-speed communications networks like 5G and other future technologies.

The crux of the problem according to US officials is that Qualcomm represents the country's biggest hope in leading the 5G mobile technology race, and is among the biggest competitors to China's Huawei.

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According to London, Trump's decision to black Broadcom's hostile takeover of Qualcomm is part of a broader strategy to ensure global USA preeminence in technological innovation.

The inter-agency panel, led by the Treasury Department, scrutinizes deals that could give foreign firms control of United States companies. A Qualcomm acquisition would have amounted to the largest technology deal in history.

"Reduction in Qualcomm's long-term technological competitiveness and influence in standard setting would significantly impact USA national security", CFIUS warned.

If that should happen, a Chinese company like Huawei, which the committee has previously expressed concerns about, could step in and become dominant as 5G technology and standards and practices are developed and implemented.

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Broadcom's unsolicited takeover bid was just the most immediate in a long list of challenges for Qualcomm, which also include legal disputes with customer Apple Inc., a decline in profit and a regulatory assault on its licensing business. Broadcom's company's physical headquarters is already in San Jose, California - about 450 miles from Qualcomm's headquarters in San Diego. In such a scenario, Broadcom - which now works under the laws of Singapore - would have been considered as an American company and thus its proposed $117 billion would have been considered outside the preview of a federal agency - Committee on Foreign Investment in the US (CFIUS) - that reviews foreign deal.

And not everyone thinks the U.S. national security concerns over the deal are justified. However, Broadcom had already committed to redomiciling its business to the USA, and confirmed this week that it would do so by April 3.

Of course, these concerns about national security are mostly bogus.

After imposing tariffs on steel and aluminum imports, Trump is said to be mulling import levies on tech producs and consumer goods from China, on the grounds that the Chinese discriminates against American companies on technology transfer and violates USA intellectual property rights.

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"5G is a core piece of the franchise Broadcom is trying to purchase", Bernstein analyst Stacy Rasgon wrote in a note to clients before the deal was blocked.

Broadcom ends bid for rival Qualcomm after Trump intervention