Broadcom cries foul as United States regulator intervenes in Qualcomm saga

Qualcomm takeover bid halted by US government

CFIUS is investigating the national security implications of the business being taken over by a Singapore-based company.

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

The letter, dated 5 March, was made public by Qualcomm on Tuesday.

"I'm glad they're taking a closer look at it. Qualcomm is a leader in 5G technology, which is going to be the new standard in the future", said Senator John Cornyn, the No. 2 Republican in the Senate, who had pushed for further review. On Sunday, the government body ordered Qualcomm to delay its annual shareholder meeting, which had been scheduled for today and where investors were set to vote on the Broadcom bid through a proxy challenge.

A shift by Chinese companies to dominate 5G "would have substantial negative national security consequences for the United States", the Treasury said.

Qualcomm is one of the leading players in the build-up to 5G networks (in partnership with Nokia), Huawei is the main competitor.

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A source familiar with CFIUS' thinking said that if the deal was completed, the USA military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice".

The moving "process is well underway" and accused Qualcomm of secretly scuttling the takeover effort by appealing to CFIUS, Broadcom insists.

"Qualcomm has become well-known to, and trusted by, the US government", the Treasury Department wrote to lawyers involved in the deal on Monday. Ordinarily, it only weighs in after a deal is agreed upon - and can recommend that the president block any deal it considers a threat. With 11 seats on the Board, Broadcom lobbed in a slate of 6 candidates, hoping that it could win control of Qualcomm and rubber stamp Broadcom's $117 billion bid for the Snapdragon chip designer.

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.

"Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company - and in a hostile takeover no less", Cotton said in a statement Monday. The transaction falls under CFIUS's jurisdiction since Broadcom is now domiciled in Singapore, although it announced at the end of past year it would return to the U.S. and plans to do so by May.

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