Trump Blocks Broadcom, Qualcomm Merger Citing National Security Concerns

Trump Blocks Broadcom, Qualcomm Merger Citing National Security Concerns

The saga took a surprising turn on Monday 12th, when the White House issued an order blocking the purchase.

CFIUS was anxious that Broadcom's takeover would lead to a decline in investments in research and development in the sector, opening the door for Chinese firms to take the lead in developing next-generation wireless technology.

Qualcomm is known for mobile chip innovations that set industry standards, for example in 5G wireless connection technology, he said. 5G may spur a new era of "smart cities" whose energy grids, traffic signals and emergency services are linked to reduce inefficiencies, NBC News reported.

Broadcom has pulled its $117 billion bid to acquire Qualcomm.

Reportedly Broadcom has a history of overspending on acquisitions and widening its assets rather than focusing on the R&D.

Broadcom's board was meeting on Tuesday night to formalize its plans and it could make an announcement as soon as Wednesday, the two sources added. Treasury Department further sent a letter to both, Broadcom and Qualcomm which was made public on the 12th of March.

"In short, US national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation". "The same is true for American wireless technology".

What's to stop Trump or the CFIUS from barring other companies from considering acquisitions from non-U.S. -based companies?

Brenon Daly, research director of financials for 451 Research, called the order an overreach and said by meddling in the market, "Trump is artificially skewing the competitive landscape". "The government is being very careful to ensure the USA keeps its leadership role developing these standards".

It would have been the biggest-ever deal in the tech sector. The Trump administration is considering clamping down on Chinese investments in the USA and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property.

"One risk now is that without the market discipline it may relax and lose the 5G race anyway", the newspaper said. Although, Qualcomm is in the process of contesting this decision, the company is still likely to end up paying a large settlement.

The Wall Street Journal said Cfius has broad powers that don't need to be expanded.

"Although we are disappointed with this outcome, Broadcom will comply with the order", Broadcom said in a statement. "The U.S. economy doesn't need more political control over investment".

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