Qualcomm takeover a national security risk, says US

07 March, 2018, 00:27 | Author: Kristen Mcgee
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Qualcomm quickly responded with a statement accusing Broadcom of continuing a "now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialise and ignore serious regulatory and national security issues".

The inter-agency body, led by the Treasury, rarely looks at mergers before firms have clinched an agreement, highlighting the urgency of USA concerns about safeguarding semiconductor technology and casting doubt on the deal's success.

Qualcomm stated on 5 March that "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact".

The US government is concerned that Chinese companies, including big network equipment and mobile-phone maker Huawei Technologies, will take advantage of any openings to take the lead in the next-generation mobile-phone networks known as 5G. The New York Times is reporting that the Committee on Foreign Investment in the United States, or CIFUS, notes that the risk is related to Broadcom's relationships with foreign entities.

The United States' Committee on Foreign Investment (CFIUS) took the unusual step Monday of ordering California-based chipmaker Qualcomm to delay a board meeting scheduled for Tuesday where Singapore company Broadcom Limited planned to seize control in a hostile takeover. Any loss of that competitiveness, the letter said, "would significantly impact USA national security".

Treasury also cited the Defense Department's reliance on products made by Qualcomm, which is based in San Diego.

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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".

"Qualcomm has become well-known to, and trusted by, the USA government", the Treasury Department wrote to lawyers involved in the deal on Monday.

In January, Chinese firm Ant Financial canceled its bid to acquire US money transfer company MoneyGram, after CFIUS rejected the deal, citing concerns over the safety of data that can be used to identify USA citizens. Ordinarily, it only weighs in after a deal is agreed upon - and can recommend that the president block any deal it considers a threat.

Qualcomm rejected a $105 billion offer from Broadcom in November.

"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.

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