US President Donald Trump on Monday blocked an unsolicited bid by Singapore-based Broadcom to take over smartphone chipmaker Qualcomm, citing national security concerns. “This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom’s independent director nominees”, said Broadcom in a statement. A White House official on Monday confirmed that the national security concerns related to the risks of Broadcom’s relationship with third party foreign entities. Such a huge semiconductor company was enough to worry, which the Wall Street Journal reported last week was considering buying Broadcom if the deal actually went through.
This afternoon Broadcom released a statement on the news: “Broadcom is reviewing the Order”.
The US government is reportedly concerned Broadcomm could cut R&D investment, thereby increasing the likelihood of Asian companies rising to dominant supplier status. “It is USA military power and economic power going forward and he’s got a very consistent point of view”, said Ron Napier, head of Napier Investment Advisors.
Its bid interest was blocked at a sensitive time – given the world is gearing up for the roll-out of ultra fast 5G mobile services and Mr Trump’s wider agenda to protect the interests of United States companies.
“Qualcomm is leading in the rollout of 5G technology across the nation and this takeover threatened San Diego’s economy, jobs, and intellectual property in addition to our national security and telecommunications infrastructure”.
President Donald Trump hugs Broadcom CEO Hock Tan as Tan announces the repatriation of his company’s headquarters to the United States from Singapore during a ceremony in the Oval Office of the White House on November 2, 2017.
The order effectively ends a four-month saga that saw Qualcomm, the world’s fourth-largest chip company by annual revenue, targeted by a smaller company with greater momentum.
He also noted that Department of Defense programs rely on access to Qualcomm products. The company must stop the acquisition together with Broadcom and provide written proof of this once the step has been taken.
Trump’s order disqualifies the 15 potential board members Broadcom hoped to install from serving on Qualcomm’s board.
Qualcomm also has raised the specter of a long, hard regulatory review by global competition agencies, which could weaken the company just as 5G networks are rolling out.
For its part, Qualcomm said Broadcom’s claims were misleading. “Broadcom would have likely dismantled Qualcomm’s long-term investment in wireless, so the block is understandable”, he said. The U.S. feared that Broadcom would curtail investment in research and development, undermining Qualcomm’s position in developing 5G and creating an opportunity for China’s Huawei Technologies Co.
While Broadcom shares were holding steady in the wake of the announcement, investors were less enthusiastic about Qualcomm’s chances, and shares dropped 4.5 per cent after hours.