Here's Why the US Government Doesn't Want Broadcom to Buy Qualcomm

Here's Why the US Government Doesn't Want Broadcom to Buy Qualcomm

Here's Why the US Government Doesn't Want Broadcom to Buy Qualcomm

There's been yet another twist in the ongoing saga of Broadcom's attempt to take over Qualcomm. Qualcomm said in response that Broadcom misinterpreted the public's and investors' mind while ignoring national security issues and regulatory matters.

USA regulators ordered a delay in Qualcomm's annual shareholder meeting, which was scheduled Tuesday, so they can review a proposed $117 billion hostile takeover bid by Broadcom for national security concerns. The convoluted claim, related to a Department of Treasury letter, is that if Broadcom buys Qualcomm, then China will fill a theoretical void left by Qualcomm no longer being a US company.

The Treasury Department laid out its concerns in a letter to both chipmakers explaining its Sunday order to delay Qualcomm's annual shareholder meeting.

Broadcom was based in the USA until 2016, when it was acquired by Singapore-based Avago.

Qualcomm is known for inventing the 2G and 3G wireless network technology that's used by carriers like Verizon and Sprint.

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". Any changes in supply of these products or services could pose national security concerns. Reuters reported last week that CFIUS had begun looking at semiconductor firm Broadcom's bid as pressure grew from politicians, including senior Republican Senator John Cornyn.

Broadcom's bid to acquire Qualcomm for $117 billion may be stymied by United States security concerns. "Broadcom's dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom", Qualcomm said in a statement.

Chinese tech companies have been aggressively pursuing 5G technology at the urging of their government.

Perhaps its not that surprising, the USA has been pretty negative towards foreign companies lately.

As CFIUS continues to investigate the deal, Qualcomm said it's delaying the shareholders' vote to elect new board members by at least 30 days.

The risks of the potential deal "warrant a full investigation". A source familiar with CFIUS says that if the deal goes through, there may be no other option for American carriers than to rely on Huawei. In the end, that approval came just weeks after Broadcom Chief Executive Officer Hock Tan announced in an Oval Office ceremony with Trump that Broadcom would bring its headquarters to the United States.

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