Life&Culture

President Trump blocks Broadcom's bid for Qualcomm following national security recommendations

President Trump blocks Broadcom's bid for Qualcomm following national security recommendations

The letter continued, explaining that, "given well-known US national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States".

According to President Trump, there are some concerns that the acquisition of Qualcomm by Broadcom could affect the national security of the US.

"President Trump and his administration made the right decision on blocking Broadcom from taking over Qualcomm", Senate Democratic Leader Chuck Schumer said in a speech on the Senate floor. The deal would have been the biggest technology sector takeover on record. For instance, Qualcomm is viewed as being ahead of the curve in the development of next-generation 5G wireless technology, and the US government likely thinks that ceding control to Broadcom could allow Chinese companies such as Huawei to become leaders in this crucial space going forward.

The months-long, back-and-forth merger talk between US chipmaker Qualcomm and its Singapore-based peer Broadcom hit an unexpected wall when President Donald Trump issued an executive order to block the deal, saying it would pose threats to national security.

Trump cites subsection 721f of the Defense Production Act of 1950 in the order, but does not specifically refer to how a merger between the two silicon design firms would "impair the national security of the United States". The first is Intel Corp, the American computing giant who considered buying Broadcom themselves in order to prevent the threatening merger of the two rival manufacturers.

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As such, Broadcom and Qualcomm "shall immediately and permanently abandon the proposed takeover", Trump ordered. However, Broadcom stated that it had fully complied with the interim orders.

Trump disagreed with this line of reasoning, however.

"This decision is based on the facts and national security sensitivities related to this particular transaction only and is not meant to make any other statement about Broadcom or its employees, including its thousands of hardworking and highly skilled United States employees", Mnuchin said. "Better to keep it in American hands and protect American national security", Cotton said.

It is also ironic that the United States is blocking a takeover of Qualcomm out of fears for what it might mean for Chinese leadership in mobile, just when the San Diego based business is increasingly dependent on the Chinese market. The San Diego, California-based company, the world's largest maker of chips for phones (if you own a high-end Android phone, it's likely using a Qualcomm processor), owns a number of the technologies that served as the foundation for 3G and 4G technology, and it's been pouring R&D dollars into 5G.


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