Broadcom withdraws $121b bid for Qualcomm

Broadcom withdraws $121b bid for Qualcomm

Broadcom withdraws $121b bid for Qualcomm

The foreign chipmaker today announced that it's complying with an order issued by President Trump that cited national security in blocking the deal.

Broadcom, however, expects to continue with its plan to redomicile to the United States.

Earlier this month, the Committee on Foreign Investment in the United States, which reviews the national security implications of foreign investments in USA companies, cited concerns about the proposed Broadcom-Qualcomm marriage.

The move by Trump was a rare intervention by a president, but under his administration, multiple deals have been quashed after a review by the panel, the Committee on Foreign Investment in the United States, popularly known as CFIUS. The lesson is that parties to transactions involving US businesses and inbound foreign investment must go beyond traditional anticompetitive analyses to consider the identity of the parties involved, their country of domicile and relationship to foreign governments, the nature of the USA business, and the conceivable implications for national security. It added that "given well-known US national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the U.S".

The order further requires both Broadcom and Qualcomm to certify with the CFIUS that the takeover effort has been terminated, and to provide details with "a timeline for projected completion of remaining actions". The deal would make Broadcom the third-biggest maker of microchips, behind only Intel and Samsung. John Cornyn of Texas and Tom Cotton of Arkansas, were among the first to urge CFIUS to investigate Broadcom's acquisition attempts. "Qualcomm faces a number of challenges that hamper its role in developing 5G", Tan wrote in a letter sent to U.S. Congress last week. Broadcom has seemingly close ties with Chinese smartphone maker Huawei Technologies, with Huawei using the Singaporean company's chips in networking products. In short, Broadcom had made it clear that it planned to focus on Qualcomm's past patents instead of producing new technology with the company's resources. However, to boost its acquisition offer, Broadcom lately has worked on putting supportive members on Qualcomm's board.

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President Trump's order prohibiting Broadcom from taking over Qualcomm is all about China, especially Huawei.

Broadcom meanwhile is working to address the concerns that its acquisition will pose a security risk.

Meanwhile, Broadcom announced today that is has accelerated its timetable for redomiciling its organization from Singapore to the USA, moving up the date from May 6 to April 3.

The Singapore-based company also withdrew its list of directors that were nominated for election to Qualcomm's board. If Broadcom fails to get approval even after shifting the headquarters, then the company would possibly take the matter to court. While it remains to be seen what Broadcom's first acquisition target would be after it becomes an American company, one name being bandied about by market analysts is USA semiconductor maker Xilinx. In September, Trump blocked a Chinese state-owned company from acquiring an American semiconductor firm.

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