Why Qualcomm deal worries U.S.

U.S. officials worry that if Broadcom Ltd. succeeds in its hostile takeover of Qualcomm Inc., that might weaken the San Diego chip maker and open the door for China to become the leader in next-generation wireless technologies, among other national security concerns.

The Treasury Department laid out its concerns in a letter to both chip makers explaining its Sunday order to delay Qualcomm’s annual shareholder meeting. At the meeting — previously scheduled for Tuesday — the San Diego company’s shareholders were to vote on whether to hand control to Broadcom by putting Broadcom-backed candidates on Qualcomm’s board of directors.

The secretive Committee for Foreign Investment in the United States ordered the 30-day delay so it could further investigate the national security implications of a takeover of Qualcomm by Broadcom, which is based in Singapore and San Jose. The committee is a multi-agency body led by the Treasury.

Qualcomm included the letter in a filing Monday with the U.S. Securities and Exchange Commission. Its shareholder meeting is rescheduled for April 5.

The $117-billion deal would be the largest in semiconductor industry history. Qualcomm has rejected Broadcom’s $79-a-share bid and sought the foreign investment committee’s review.

Treasury officials said Qualcomm supplies products to the U.S. government and works with it on cybersecurity for the next generation of wireless, 5G and the internet of things. Any changes in supply of these products or services could pose national security concerns.

Many of the national security concerns surrounding the potential takeover are classified, the letter said.

Qualcomm shares fell 2.9% to $62.14 on Tuesday. Broadcom shares rose 1.6% to $250.96.