US President Donald Trump has blocked a hostile bid by the chipmaker Broadcom for its rival Qualcomm, saying the deal threatens national security.
Singapore-based firm Broadcom proposed a bid of $140bn (£100bn) for US-based Qualcomm, the biggest technology sector takeover on record if finalised. Broadcom has proposal numerous bids for Qualcomm recently, all of which have been rejected.
Yet, on Monday Trump’s order to prevent the merger cited “credible evidence” that the deal “threatens to impair the national security of the US”. Largely coming from concerns that the takeover could have weakened the development of 5G wireless technology in the US.
Qualcomm is one of the largest producers of chips and other mobile technology, and supplies components for iPhone and Android devices. Yet, the firm is also regarded for its research and development (R&D), particularly in the development of wireless 5G technology.
The Committee on Foreign Investment in the United States (Cfius), a group led by the US Treasury Department which vets foreign acquisitions, also raised concerns for competitiveness relating to the merger. These included possible cuts to R&D that would hold back Qualcomm, allowing Chinese firms like Huawei to move ahead in the race to develop 5G. Cfius also offered a veiled warning that Broadcom could harm the US company’s assets through arrangements with “third-party foreign entities”.
Others have said that Trump is using national security concerns to safeguard US economic interests – as a response to growing US imports.
The Trump administration have used a similar justification to set tariffs on steel and aluminum imports – sparking tension with international trade partners.
Mr Trump’s willingness to grant exemptions, partly on the basis of what he sees as a fair trade relationship with the US, is consistent with the idea that it’s not just about security.
Broadcom has said it “strongly disagrees” with security concerns raised by the proposed acquisition of Qualcomm, and is reviewing the order.