Trump blocks Broadcom bid to buy Qualcomm, citing 'national security concerns'

President Trump says Broadcom must pull out of attempt to buy Qualcomm

Last week, the U.S. Committee on Foreign Investment said it was considering investigating the proposed Broadcom deal citing national security concerns, which ended up delaying a March Qualcomm shareholder meeting.

"The president's action not only banned the (Broadcom-Qualcomm) deal, but restricted 'any substantially equivalent merger, acquisition, or takeover, '" Ellis said.

As such, Broadcom and Qualcomm "shall immediately and permanently abandon the proposed takeover", ordered the US President.

CFIUS's concerns over the deal are said also to stem from Broadcom's ties to Huawei, which was blacklisted in 2012 along with ZTE when the US House Intelligence Committee cited security risks posed by the companies.

Aside from Qualcomm and Broadcom, there are two other manufacturers that are no doubt following this development with interest. On Twitter this morning, California Rep. Susan Davis (D, 53rd District) said the decision was "good for San Diego, our regional economy, and national security".

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"This decision is based on the facts and national security sensitivities related to this particular transaction only and is not meant to make any other statement about Broadcom or its employees, including its thousands of hard working and highly skilled U.S. employees", U.S. Treasury Secretary Steve Mnuchin said in a statement.

The president's decision is highly unusual and is only the fourth time in the past three decades that a U.S. president has intervened directly to scupper a foreign investment deal. However, if the takeover would have been successful, China would've had an upper hand in mobile communications.

In contrast, he said Broadcom is adept at using intellectual property developed by others and making products at low cost, referring to them as "implementors".

During the past couple of months, the news about the expected acquisition of Qualcomm Inc.

Now that Broadcom has been shoved aside, Qualcomm will be under pressure to prevent its stock price from sinking while trying to complete its own proposed takeover - a proposed $43 billion purchase of NXP Semiconductors.

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5G, or the fifth generation of cellular technology, is seen as a potential game-changer because of its heightened speed, responsiveness and ability to handle a myriad of connected devices.

This move comes contrary to Trump's comments about Broadcom last November when he called the group "one of the great, great companies", which he was "thrilled" to welcome to the US. It sees 5G as a fresh start to make a bigger mark in the mobile world, but likely didn't want to compete against the combined might of Broadcom and Qualcomm. The takeover has been talked about for a number of months, but now the president - in line with his "America first" drive - has scuppered what would have been the largest technology deal ever.

Analysts also speculated that the deal was nixed as the White House fears China would pull ahead in 5G if Broadcom emphasised short-term profits over research & development at Qualcomm.

In the recent years, Qualcomm has grown to become one of the biggest competitors to China's Huawei Technologies Co.

Broadcom had sought to provide assurances it would continue investing in research after the takeover, but in a letter on Sunday sent to both companies CFIUS said Broadcom's actions had "so far" confirmed its national security concerns.

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The move highlighted President Trump's protectionist policies and signs of nationalistic tendencies in the US, in Hadley's opinion.

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