US Treasury Department Blocked Broadcom from Acquiring Qualcomm

US Treasury Department Blocked Broadcom from Acquiring Qualcomm

US Treasury Department Blocked Broadcom from Acquiring Qualcomm

The government said it fears an acquisition by Broadcom could threaten Qualcomm's competitiveness. Last we heard, Qualcomm had set an asking price of $160 billion for the buyout after months of back-and-forth between the two tech giants, but now any possible deal may have completely hit the rocks due to outside interference. The US official who wrote the letter referenced worries about the potential for China to "compete robustly to fill any void left by Qualcomm as a result of this hostile takeover" and noted existing concerns around Chinese companies like Huawei.

The U.S. government is concerned with national security risks associated with a Singapore-based company being allowed to take over America's largest and only semiconductor manufacturer.

The secretive panel, called the Committee on Foreign Investment in the United States (CFIUS), has scuppered several attempts by Chinese technology companies to acquire USA chipmakers in the last 12 months over concerns about the transfer of potentially sensitive technology. On March 4, 2018, the U.S. Department of Treasury ("Treasury") filed an agency notice pursuant to 31 C.F.R. § 800.401 (c), broadening the scope of review to cover the. proposed hostile takeover of Qualcomm. The letter caused Qualcomm to delay a critical shareholder vote on the meeting by 30 days. Broadcom shareholders are expected to vote on the move in early May. The transaction falls under CFIUS's jurisdiction since Broadcom is now domiciled in Singapore, although it announced at the end of a year ago it would return to the U.S. and plans to do so by May.

An investigation by the CFIUS into a deal that has been proposed, but not yet completed, is highly unusual, and underscores the US' concerns about maintaining its dominance in semiconductors in the face of advances by China.

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On Wednesday, Broadcom said that if it acquires Qualcomm, the company is committed to making the United States "the global leader in 5G". "Articulation of the potential national security concerns, in significant part, is classified". But Broadcom's announcements are starting to smack of reactive desperation as the political game turns against it. The rival chipmaker accused Qualcomm of "secretly" seeking a voluntarily CFIUS review in January and failing to disclose the move to Broadcom during merger talks.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies, such as Huawei Technologies, vying for market share in the sector.

Treasury's letter cited Chinese chip maker Huawei as a competitive threat in the development of 5G. Some of the concerns to the United States government over national security involve Broadcom's relationships with foreign entities, but no names were released.

CFIUS's ability to intervene in the merger could disappear if Broadcom moves its headquarters to the US, as it promised to do at a public White House ceremony in November.

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