Republican lawmakers back review of Broadcom's Qualcomm bid

08 March, 2018, 01:36 | Author: Chad Mckenzie
  • Citing security Republicans support CFIUS review of Broadcom bid for Qualcomm 0

Qualcomm declined to comment on Broadcom's Wednesday statement. There is also concern that the supply of Qualcomm tech goodies to the USA state may be affected by the move. The US official who wrote the letter referenced worries about the potential for China to "compete robustly to fill any void left by Qualcomm as a result of this hostile takeover" and noted existing concerns around Chinese companies like Huawei.

The CFIUS said it views 5G as important for USA national security, and that it was concerned about the potential for Chinese tech companies getting more influence into 5G development in the United States.

The secretive Committee for Foreign Investment in the U.S. (CFIUS) issued the order so it could further investigate the national security implications of a possible takeover.

"We can not overstate the likely harm (from a Broadcom hostile takeover) that would result to Qualcomm, the USA company leading the development of 5G and other next-generation technologies, as well as to the United States security interests", said the Gallagher letter.

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Over the weekend, the government asked Qualcomm, which is based in San Diego, to delay its annual shareholder meeting by 30 days as it conducts its review. Broadcom shareholders are expected to vote on the move in early May. Broadcom is now based in Singapore, but has promised to relocate to the United States if the deal is approved.

The government action on March 4 highlighted growing USA concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.

What's at stake: US-based Qualcomm is a leader in 5G wireless tech for things like driverless cars. Any changes in supply of these products or services could pose national security concerns. The Committee is particularly concerned that if Qualcomm does not maintain its position as one of the top investors in semiconductor research, it could lose its leading position in helping to determine global industry standards.

The investigation by CFIUS, which considers national security risks to foreign acquisitions of U.S. companies, came after Qualcomm filed a notice with the panel seeking a review.

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The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology, allowing the transmission of data at faster speeds. But it now appears willing to continue to pursue its bid for Qualcomm through the CFIUS review, said Bernstein Research Analyst Stacy Rasgon in a research note.

The risks of the potential deal "warrant a full investigation". The rival chipmaker accused Qualcomm of "secretly" seeking a voluntarily CFIUS review in January and failing to disclose the move to Broadcom during merger talks.

Broadcom also underlined its roots in the United States, saying it is "in every important respect an American company", built from divestments and acquisitions from companies such as HP, AT&T and Brocade.

Ultimately, the CFIUS will look at the deal from a national security standpoint.

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