Tuesday, 25 September, 2018

Trump blocks Broadcom takeover of Qualcomm

The tech industry's cozy ties to China may not last Trump blocks Broadcom takeover of Qualcomm
Lisa Bryan | 13 March, 2018, 11:18

"There is credible evidence that leads me to believe that Broadcom Limited. through exercising control of Qualcomm Incorporated ... might take action that threatens to impair the national security of the United States", president Trump's order stated. The takeover, which would have been the largest transaction the technology industry had ever seen, was tripped up by concerns that it posed a threat to American competitiveness in mobile technology by putting one of the largest mobile chip makers in the US under the control of a company based in Asia.

The administration moved with unusual speed in the matter that caught many involved in the negotiations off guard.

Last week, the U.S. Committee on Foreign Investment said it was considering investigating the proposed Broadcom deal citing national security concerns, which ended up delaying a March Qualcomm shareholder meeting.

As a result of the presidential order, Broadcom's purchase efforts are on hold for the time being, if not forever.

In a letter to the companies on March 5, CFIUS expressed concerns that Broadcom would not be willing to fund the research needed to maintain Qualcomm's strong position on so-called 5G technology, a forthcoming standard for wireless data networks, leaving the USA with nowhere but China to turn for such technology. Broadcom, a Singapore-based company, has been attempting to nab Qualcomm for months, something the latter company has been resistant to. At present, Qualcomm and Huawei Technologies are trying to sign an agreement on their licensing dispute. Nearly every major business and consumer electronics manufacturer uses Qualcomm's technology as brains for their devices.

Trump disagreed with this line of reasoning, however. Last week, Trump also approved stiff and sweeping tariffs in the name of national security, saying that steel and aluminum imports were a threat to American manufacturing. At least a half-dozen technology deals have collapsed during the Trump administration in the face of concerns raised by CFIUS.


Mr Trump had earlier used his veto powers to scuttle the Chinese government-backed Canyon Bridge Capital Partners' attempt to buy the Lattice Semiconductor Corp in September.

Broadcom Chief Executive Hock Tan met earlier Monday with CFIUS officials to make its case to be allowed to pursue an acquisition of Qualcomm. He has not spoken about the matter recently.

He described Trump's executive order as "brutal".

Shares of Broadcom rose less than 1.0 percent to $264.10 in after-hours trade while Qualcomm fell 4.3 percent to $60.14.

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. While chips that connect phones to networks and run programmes on smartphones generate the majority of its sales, patents on inventions that cover the fundamentals of all modern phone systems let Qualcomm collect highly profitable fees from phonemakers. Cable-quality service could even be provided over the air, instead of a wireline connected to a house.

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