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President Blocks Broadcom's Plan To Take Over Qualcomm

President Blocks Broadcom's Plan To Take Over Qualcomm

The order came a week after the Committee on Foreign Investment in the United States, or CFIUS, expressed concern that the takeover of Qualcomm by Singapore-based Broadcom could leave the USA behind when it comes to mobile technology. Lawmakers accused the company of having close links to Beijing, and said it posed a threat to U.S. national security.

In announcing its 2017 results Qualcomm made clear just how big an impact that dispute is having on its financial performance, with revenues for its licensing arm forecast to be between 40% and 49% down year-on-year in the current quarter as Apple continues to withhold licensing payments. However, Trump blocked the bid, citing "credible evidence" that the deal "threatens to impair the national security of the US".

A panel that advises the President on business deals that could affect national security, the Committee on Foreign Investment in the USA, also feared the somewhat strong ties between Huawei and Broadcom. Trump's blocking order also eliminates all the fifteen directors that Broadcom proposed for Qualcomm. The letter cited concerns about Qualcomm's research and development efforts in 5G connectivity, and the potential that any weakening of those efforts "would leave an opening for China to expand its influence on the 5G standard-setting process".

However, while acknowledging that national security concerns about the deal were "defensible", the San Diego Union-Tribune in an editorial today questioned whether other motivations also played into the decision.

Qualcomm quickly spurned its unsolicited suitor and continued to resist even after Broadcom raised its original offer from $103 billion.

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Qualcomm and Huawei have already conducted joint tests on 5G technology, and both companies are part of an global 5G alliance that includes Nokia, Ericsson and Intel. Trump has ordered both Qualcomm and Broadcom to abandon the idea of a takeover. Unlike Qualcomm, Tan said, Broadcom financed its innovation through "lawful practices".

The Singapore-based Broadcom has been trying to acquire fellow chipmaker Qualcomm for the past several months, but the proposed merger was met with constant rebuttals.

The president concurs. And so endeth the proposed union of Qualcomm and Broadcom, a brief shining dream that nobody seems to have wanted, no one seems to have thought would do anybody much good, and which came with risks to national security that left everyone in the room cold. Plus, Qualcomm still hasn't closed its purchase of NXP Semiconductors (NXPI), which needs to get approval from regulators in China. According to Bloomberg, the company is now working to shift its headquarters from Singapore to the U.S. The transition is expected to be completed by April 3.

The Trump administration isn't exclusively concerned about foreign technology-based companies.

And the US government has already been actively blocking Huawei's USA ambitions, including pressuring AT&T (NYSE:T) from carrying Huawei smartphones just prior to the planned CES 2018 announcement of that deal. Last September, he blocked the sale of Hillsboro, Ore. -based Lattice Semiconductor (LSCC) to Canyon Bridge Capital Partners, which has ties to a fund owned by the Chinese government.


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