Broadcom to Qualcomm: We're coming for you

Broadcom's Qualcomm bid gets a kick in the groin from the US government

At the meeting - previously scheduled for Tuesday - the San Diego company's shareholders are to vote on whether to hand control to Broadcom by putting Broadcom-backed candidates on Qualcomm's board of directors.

Broadcom said on March 5 that CFIUS' intervention was the result of secret moves made by Qualcomm on January 29 to seek an investigation into the offer, which Qualcomm's board has said significantly undervalues the company. Since Trump took office past year, at least half a dozen foreign acquisitions of American technology firms have been scuttled in the face of national security concerns raised by CFIUS.

The U.S. Committee on Foreign Investments said Qualcomm's position in 5G technology was good for national security and expressed concern over the Singapore-based company's ties to foreign organizations.

Broadcom's hostile takeover attempt of Qualcomm could pose a national security risk because of Qualcomm's leadership in developing critical semiconductor technology, according to the USA treasury department, setting up a potentially insurmountable hurdle to getting a deal done. It seems that Qualcomm contacted United States investment authorities to launch an investigation, which incidentally led to Qualcomm's annual shareholders meeting being delayed. Broadcom then attempted to force a vote to install six new members on the 11-person board, who would effectively do Broadcom's bidding, but the USA government intervened.

Before Broadcom disclosed its buyout offer for Qualcomm in November, Trump himself announced Broadcom's plan to shift its headquarters back to the United States after a White House meeting with CEO (chief executive officer) Hock Tan, a Malaysia-born businessman.

The government action on March 4 highlighted growing US concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.

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Broadcom has accused Qualcomm of failing to negotiate seriously, saying they were involved in "engagement theater". Broadcom's dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom.

"Qualcomm's partnership with the U.S. government encompasses efforts to address cybersecurity in the next generation of wireless, 5G and the Internet of things", treasury said. 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".

Broadcom, which is the fourth-largest company in the global semiconductor industry, tried to take over Qualcomm, the third-largest, for more than four months.

Assuming its aim was to scupper Broadcom's hostile takeover, the Qualcomm board seems to have played a blinder in getting the CFIUS involved. 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. That would have opened the door further to Broadcom taking over Qualcomm.

With CFIUS examining the deal, Qualcomm now can work to close its pending $43 billion of NXP Semiconductors to diversify its business beyond smartphones, attempt to make progress on patent licensing disputes with Apple and try to construct a stronger case to shareholders to remain a stand-alone company, said Rasgon.

Anyway, CFIUS rarely gets involved before a deal is signed – Broadcom and Qualcomm are still negotiating.

Qualcomm's 5G chips are used by the Pentagon, and if it loses its competitive standing under the Broadcom umbrella, it could leave China's Huawei as the dominant chipmaker, Reuters reported, citing a source familiar with CIFIUS' thinking.

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