The order issued by President Trump prohibits the proposed acquisition of the Delaware-based manufacturer Qualcomm by Broadcom, as well as "any substantially equivalent merger, acquisition, or takeover, whether affected directly or indirectly".
The executive order, released last night, abruptly ends Broadcom's four-month attempt to buy Qualcomm, a deal that would have been the largest ever completed in the technology sector.
"Any transaction or other device entered into or employed for the goal of, or with the effect of, avoiding or circumventing this order is prohibited", Trump wrote in the order. The deal had been under scrutiny from regulators and others, and would have seen the Singapore-based Broadcom officially take over the US -based Qualcomm. That followed another CFIUS letter last week, again to both companies, which questioned what a deal might mean for Qualcomm's position in the development of 5G technology. Of course, Broadcom "strongly disagrees" with the assessment that the acquisition poses national security risks, and has stated that it is reviewing the order.
Broadcom may be Singapore-domiciled, but it was originally an American company, still has the majority of its staff and office space in the United States, and had announced plans to re-domicile there. CFIUS also said that Broadcom defied an interim order requiring that it give a panel 5 business days' notice before taking steps to officially relocate.
First, it appears that Broadcom doesn't yet have a Plan B.
It is also ironic that the United States is blocking a takeover of Qualcomm out of fears for what it might mean for Chinese leadership in mobile, just when the San Diego based business is increasingly dependent on the Chinese market. "These ties were most recently reflected in the agreements Broadcom signed with HBC, Inspur and StarTimes.ï¿½China has a finely honed capability to access the technology of companies such as Broadcom, along with that of their subsidiaries and acquisitions", he said.
Senator Tom Cotton said that Qualcomms work is too important to the U.S. national security to let it fall into the hands of a foreign company-and in a hostile takeover no less.
China is said to be the main reason behind Trumps decision, USA daily The New York Times said.
"We all know that China has been rapacious about trade and very smart. There is certainly an argument that wireless IP/semiconductors are essential to national security". The San Diego, California-based company, the world's largest maker of chips for phones (if you own a high-end Android phone, it's likely using a Qualcomm processor), owns a number of the technologies that served as the foundation for 3G and 4G technology, and it's been pouring R&D dollars into 5G.