The U.S. government has outlined key concerns about Broadcom 's proposed merger with Qualcomm, including national security and a risk that Qualcomm could lose ground to China on developing 5G wireless network technology.
The statement comes as the hostile takeover plan sits in doubt thanks to intervention by the Committee on Foreign Investment in the US (CFIUS) and its investigation into allegations the merger could introduce a national security risk via the combined companies' positions in the CPU and comms equipment markets. The government said it fears an acquisition by Broadcom could threaten Qualcomm's competitiveness.
Qualcomm said on Monday it was delaying its annual meeting to April 5. Theres always the possibility that Broadcom will sell off parts of Qualcomm after the acquisition. If Qualcomm weren't the company setting the standard for wireless innovation going forward, it could impact national security, the letter goes on to say. Broadcom, a Singaporean semiconductor company, was planning to acquire Qualcomm by appointing six new board members at the meeting.
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Today, Qualcomm stockholders were supposed to vote on the make up of the company's Board of Directors. The US official who wrote the letter referenced worries about the potential for China to "compete robustly to fill any void left by Qualcomm as a result of this hostile takeover" and noted existing concerns around Chinese companies like Huawei.
Last month, US semiconductor testing company Xcerra Corp said CFIUS had blocked its $580 million sale to a Chinese state-backed semiconductor investment fund.
It also said Broadcom's claims it was unaware of the CFIUS process had "no basis in fact".
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Broadcom struggled to win CFIUS approval to buy Brocade Communications Systems late previous year. Broadcom is based in Singapore.
The firm said it expects 5G to take off faster than 4G, hitting 2.6 billion connections by 2025, more than 20 percent of all mobile subscriptions. The company said it recognizes "the important role CFIUS plays in protecting our national security, and is fully committed to cooperating with CFIUS in any review".
The proposed takeover of Qualcomm by Broadcom could be the largest ever tech acquisition in history if it is given the go-ahead. Washington has always been wary of acquisitions of sensitive technology, particularly by Chinese buyers, but scrutiny has intensified under Trump, according to lawyers who work on such deals. But over the past week there has been an increasing call for CFIUS to step in as well for security reasons. 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.
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Broadcom has started a new offensive in its effort to take over Qualcomm, promising to invest United States dollars 1.5 billion to train engineers in the U.S. and make the country a leader in 5G technology.