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US Calls Broadcom's Bid For Qualcomm a National Security Risk

07 March, 2018, 00:28 | Author: Arnold Gilbert
  • Qualcomm shareholder meeting pushed forward by a month

The inter-agency body, led by the Treasury, rarely looks at mergers before companies have clinched an agreement, highlighting the urgency of U.S. concerns about safeguarding semiconductor technology. The letter, dated March 5, was made public by Qualcomm yesterday. It raised the possibility that a takeover would weaken Qualcomm's leadership position in mobile technology and 5G, opening the door to competition from Chinese companies such as Huawei.

The letter said that, as with every investigation, the review will look at the potential risk of an unnamed "actor" working through Broadcom to hurt USA national security, adding that the bulk of CFIUS' concerns were classified.

"Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm's Annual Meeting 48 hours before it was to take place", it said in the statement.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology, allowing the transmission of data at faster speeds.

A source familiar with CFIUS' thinking said that if the deal was completed, the USA military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice".

A source familiar with CFIUS' thinking told Reuters on Monday that if Broadcom acquired Qualcomm, the U.S. military had concerns that within 10 years "there would essentially be a dominant player in all of these technologies and that's essentially Huawei".

USA regulators are looking closely at Broadcom's offer for Qualcomm. CFIUS, under former President Barack Obama and current President Donald Trump, has soured on high-tech deals, particularly involving semiconductors, or involving sensitive information about American citizens. The panel also advised against a deal between Chinese-backed private equity firm Canyon Bridge and USA chipmaker Lattice Semiconductor Corp, leading president Trump to block the proposal in September 2017.

Bloomberg reported Monday that Broadcom was on course to win all six of the seats it is seeking on Qualcomm's 11-member board, giving it a majority slate at the chipmaker based on a count of more than half of the votes already cast.

Qualcomm management has repeatedly said it's being undervalued by Broadcom - adding that any deal could be rejected by the government on antitrust grounds.

Qualcomm pushed CFIUS to intervene in hopes of quashing the hostile takeover. Broadcom cried foul, saying this latest turn of events is an "engagement theatre", aimed at changing the will of Qualcomm stockholders.

"Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company-and in a hostile takeover no less", Cotton said in a statement.

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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