President Trump has blocked Singapore-based Broadcom’s proposed hostile takeover of Qualcomm, as reported by Kate O’Keeffe in The Wall Street Journal. The Committee on Foreign Investment in the U.S. (CFIUS) expressed concerns over the proposed deal’s implications for technological competition with China and said it was worried that Broadcom would stymie research and development, O’Keeffe writes.
She quotes Treasury Secretary Steven Mnuchin, who chairs CFIUS, as saying, “This decision is based on the facts and national security sensitivities related to this particular transaction only,” adding that it “…is not intended to make any other statement about Broadcom or its employees, including its thousands of hard-working and highly skilled U.S. employees.”
Salvatore Babones at Forbes questions why Broadcom’s takeover of Qualcomm would affect U.S. national security. “Singapore is an important U.S. economic and security partner,” he writes. “It is home to a major U.S. Navy logistics center and regularly hosts U.S. land, air, and naval forces.” In any event, he writes, “Anticipating CFIUS resistance, Broadcom was actually in the process of moving its headquarters back to the United States.” He expresses concerns that Singaporeans may feel unwelcome in the U.S. and that China will court Singaporean knowledge. Referring to the Great Firewall of China, he concludes, “It would be a shame if the U.S. put up a wall just as the Chinese are learning that it’s past time to tear theirs down.”
Finally, Ted Greenwald, O’Keeffe, and Tripp Mickle in the Journal describe a months-long process that led to the deal’s demise. They write that Qualcomm took the unusual step of unilaterally and proactively seeking a CFIUS review of the proposed transaction.
“The confluence of corporate self-interest and geopolitical considerations not only enabled Qualcomm to turn the tables on Broadcom, but canonized the San Diego company as a sort of national champion essential to battling China’s might in the next-generation wireless communications technology known as 5G,” they write.
They quote James Lewis, a technology-policy specialist at the Center for Strategic and International Studies in Washington, as saying, “The administration’s decision is a recognition that, in the digital age, national security has different requirements. The line between security and industrial policy is almost nonexistent in this case.”
Broadcom became a Singapore-based company when Avago acquired Broadcom and kept the Broadcom name. Greenwald, O’Keeffe, and Mickle note that Broadcom’s last-minute entreaties to CFIUS citing the company’s “50-year American heritage” were unsuccessful.
