U.S. committee might have issues with the Broadcom/Qualcomm deal

Casey Dawson
March 8, 2018

The company is in the midst ofreincorporating in the U.S., and has said it expects the move to be completed in the coming weeks. Now we have a few more details on the matter, with a USA advisement panel deeming Broadcom's proposed takeover plans as a potential risk to national security.

In a letter sent to both Broadcom and Qualcomm lawyers, the CFIUS - a committee made up of representatives from various U.S. government agencies - cited Broadcom's reputation for research spending cuts and potential national security risks, with the latter concern centered around Broadcom's business relationships with "foreign entities".

Singapore-based Broadcom Ltd pledged on Wednesday to make the United States the global leader in 5G technology and maintain Qualcomm's investments in the area after any merger between the two companies.

Qualcomm's shareholder meeting is now scheduled for April 5. The US government has already expressed repeated concerns about Huawei and ZTE, moving to close off their access to the American market, and the fear is Broadcom could allow the Chinese to take the lead on setting 5G standards.

Broadcom, based in Singapore, has pledged to move its headquarters to the USA, which it believes would remove CFIUS jurisdiction.

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

U.S. Sen. John Cornyn of Texas, as well as San Diego Congressmen Scott Peters, D-San Diego, and Duncan Hunter, R-Alpine, sent letters to Trump Administration officials requesting a CFIUS review.

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These days, the USA government is keeping Chinese companies at bay while mentioning national security.

Four days later, Broadcom announced its Qualcomm bid. The letter notes that Qualcomm typically ranks second among semiconductor companies in R&D spending, with Intel taking the number one spot. "Chinese companies, including Huawei [Technologies], have increased their engagement in 5G standardization working groups as part of their efforts to build out a 5G technology".

CFIUS can approve or propose changes to deals, but only the president can block a transaction on national security grounds.

The letter was only made public by Qualcomm on Tuesday 6 March and is a rarity as the CFIUS rarely weighs in on deals it is examining.

Broadcom has struggled to complete its proposed deal to buy Qualcomm as the latter has resisted, citing several concerns including the price offered and potential antitrust hurdles.

CFIUS's ability to intervene in the merger could disappear if Broadcom moves its headquarters to the US, as it promised to do at a public White House ceremony in November.

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