Monday, March 12, 2018

Trump Blocks Broadcom Takeover of Qualcomm Citing China Concerns

President Trump blocked what would have been the largest technology merger in history — barring Asian chip manufacturer Broadcom's $117 billion takeover bid for U.S. rival Qualcomm, a critical U.S. chip maker, amid national security and economic concerns about China. The Trump administration fears the merger would allow China to gain a strategic advantage in future 5G network development. The U.S. remains dominant in setting standards for 5G now, but China would likely compete robustly to fill any void left by Qualcomm as a result of the hostile takeover.
The Committee on Foreign Investment in the United States determined that an acquisition by Singapore-based Broadcom could diminish Qualcomm's investment in 5G wireless technology and eliminate an important U.S. supplier of telecommunications equipment to federal defense agencies. That would play to China's favor as its own companies look to take the lead in developing the next-generation technology.
The development of high-speed mobile technology, or 5G, is widely viewed as a commercial and national security imperative for the U.S. As the range of internet-enabled devices continues to expand, from smartphones to cars to military equipment, the country is in a global race to build the fastest and most secure networks in the world.
In recent weeks, Broadcom made increasingly aggressive overtures for Qualcomm as the company consistently rebuffed its offers as too low and worried the deal wouldn't clear U.S. regulators. Broadcom hiked up its best offer to $117 billion and publicly committed to invest in 5G technology. It also tried to install a new board of directors at Qualcomm to give Broadcom control of the company along with stock purchases. Both companies were ordered to immediately abandon the proposed deal. The order also prohibits Broadcom's proposed candidates for Qualcomm's board from standing for election.
Singapore-based tech company Broadcom Limited was speeding up plans to relocate its headquarters to the U.S. so it could acquire Qualcomm. Had Broadcom been a U.S. company, it’s possible that it could have completed a hostile takeover of Qualcomm, based in San Jose, California.

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