Trump blocks Broadcom bid for Qualcomm
President Donald Trump Monday ordered Singaporebased Broadcom to abandon its $117 billion hostile bid for Qualcomm, blocking what would have been one of the biggest technology deals in history.
In his presidential order, Mr. Trump cited “credible evidence” that the takeover “threatens to impair the national security of the United States.” The merger would have put one of America’s largest mobile chipmakers in the hands of a company based in Asia, a region that has been racing against American companies to develop the next generation of mobile technology.
The administration moved with unusual speed in the matter that caught many involved in the negotiations off guard. The Committee on Foreign Investment in the United States, or CFIUS, an interagency panel led by the Treasury Department, had several more weeks to render a recommendation to the president. Mr. Trump’s order cannot be appealed, legal experts said.
The move demonstrates the high value that the administration places on maintaining the U.S. edge in developing micro technologies.
The administration did not detail its national security concerns, but CFIUS last week sent a letter to the attorneys of the two companies saying it was concerned research and development at Qualcomm might atrophy under Broadcom’s direction, according to a copy that was reviewed by The Washington Post. If that happened, China’s Huawei Technologies, a rival to Qualcomm and a major producer of mobile chips, might become much more dominant around the world.
The tiny computer chips embedded in smartphones, smart home gadgets and a wide range of other connected devices are expected to become one of the most critical technologies in the coming years. These chipsets enable connected cars to speak to each other as well as stoplights. Almost every major business and consumer electronics manufacturer uses Qualcomm’s technology as brains for their devices.
Mr. Trump’s order is in line with the administration’s protectionist instincts. Last week, Mr. Trump also cited national security concerns in announcing a series of harsh tariffs on steel and aluminum imports, a move that hit rivals such as China as well as allies such as Germany and South Korea. And several other technology deals fell apart after CFIUS raised concerns. In September, Mr. Trump stopped the $1.3 billion acquisition of Portland-based Lattice Semiconductor by a private equity firm that had some Chinese investment.
One factor that may have pushed CFIUS to move quickly was an unusual maneuver by Broadcom to relocate to the United States. The company had said in a recent corporate filing that it was finalizing its plans to become an American entity in early April. Deals between American companies fall out of CFIUS’ jurisdiction.
A person familiar with CFIUS’s investigation, who requested anonymity to speak freely about the matter, said this strategy may have doomed the transaction. “If there is one lesson here, it’s don’t screw with the government,” the person said.
He described Mr. Trump’s executive order as “brutal.”
“It smacks of anger on the part of the government to me. This feels a little more personal to me,” the source said.
Qualcomm and Broadcom did not immediately respond to requests for comment Monday night. In after hours trading, shares of Qualcomm sunk as much as 4 percent from its market close of $62.81. Shares of Broadcom rose less than 1 percent.
Qualcomm and a host of other big technology companies are racing to build a next-generation nationwide network known as “5G” with download speeds that could be 100 times faster than what most consumers experience now on their wireless service. Once deployed, a high-definition movie could load instantly on a smartphone. The capabilities of connected devices at work and home would vastly expand. Cable-quality service could even be provided over the air, instead of a wireline connected to a house.
Several analysts said the U.S. government is growing concerned that Huawei will develop such technologies almost as fast as their American counterparts, narrowing the gap between Chinese and U.S. companies.