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Qualcomm takeover blocked by Donald Trump due to security concerns

13 March 2018 4

US President Donald Trump has blocked the $140 billion takeover bid of Qualcomm by Broadcom citing national security concerns.

President Donald Trump has officially declared that the proposed acquisition has been prohibited due to national security grounds. The president stated that "there is credible evidence" which suggests that Broadcom’s acquisition of San Diego-based Qualcomm "might take action that threatens to impair the national security of the United States."

The announcement can after a letter was issued by the U.S. Treasury's Committee on Foreign Investment (CFIUS) on March 5 that referred to a number of issues regarding Broadcom's reputation.

Singapore based Broadcom has been looking to redomicile to the U.S., where it conducts most of its operations, so it's unclear why security concerns have been raised about the proposed deal.

"The case that has been constructed is that, given Broadcom's business practices, the worry is that they will cut investment significantly, particularly in the 5G roadmap, weaken Qualcomm, as well as the U.S. position and allow Huawei, a Chinese company to take the lead," explained Stacy Rasgon, chip analyst at Bernstein.

"It is not just China, it is not just chips. It is broad technology. It is U.S. military power and economic power going forward and he's got a very consistent point of view," said Ron Napier, head of Napier Investment Advisors. "Trump has been saying all year long since he was inaugurated that security is very important to him, technology is very important to him, trade is very important to him and getting jobs back to the United States is very important to him. He's making this all into one fabric," he added. "He sees this as the U.S.' last big stand if it's going to remain the leader of the free world."

Broadcom stated that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns."


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