Broadcom abandons plans to buy Qualcomm following U.S. government bar

Joshua Bennett
March 15, 2018

US President Donald Trump blocked Singaporean microchip maker Broadcom Ltd's proposed takeover of Qualcomm Inc, and said in a presidential order that there is "credible evidence" that the deal threatens national security.

Last week's Treasury letter said a takeover of Qualcomm could lead to a loss of United States influence in 5G standards, opening the door for Chinese firms like Huawei to dominate.

Broadcom has officially terminated its $117 billion offer to buy San Diego's Qualcomm and withdrawn its slate of nominees for Qualcomm's board of directors. He said the two companies must "immediately and permanently abandon the proposed takeover".

Beijing has already come down hard on Qualcomm, fining it $975 million in 2015 for what it called anti-competitive practices.

The chipmaking sector is in a race to develop chips for the latest 5G wireless technology and Qualcomm is considered to be a leader in this field, followed by Broadcom and China's telecoms giant Huawei.

With the Broadcom takeover behind it, Qualcomm "can get back on target", said Larry Townes, project director of the Georgetown Center for Business and Public Policy. It promised to start a $1.5 billion innovation fund and committed to building on Qualcomm's investments in new technologies like 5G wireless networks.

Absorbing Qualcomm, Broadcom would have significantly expanded the range of solutions that today are largely limited to chips for Wi-Fi and Bluetooth equipment, and also intended for industrial applications.

Also, The Committee on Foreign Investment in the United States, which reviews the national security implications of foreign investments in USA companies, had cited concern that Broadcom has a penchant for cutting costs, which might lead to Qualcomm being less of an industry leader.

Broadcom said it was "disappointed with the outcome", but had no choice to drop plans when President Trump intervened this week.

Broadcom has confirmed that it will withdraw its offer to acquire rival chip company Qualcomm.

The US$117b deal was previously probed by the US Committee on Foreign Investment in the United States (CFIUS).

Broadcom had repeatedly tried to persuade USA officials that it didn't pose a threat. This means that Broadcom will still be moving its headquarters to the United States, making it more of presence domestically.

"In short, USA national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation".

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