Broadcom-Qualcomm Merger Block: Trump 'Artificially Skews the Competitive Landscape'

US President Donald Trump

US President Donald Trump

Singapore-based tech company Broadcom Limited announced Wednesday that it will comply with President Donald Trump's orders and cancel plans to force a takeover of USA chip maker Qualcomm.

But the United States is anxious that a takeover would dramatically reduce investment and research at Qualcomm, giving an advantage to China. Broadcom's latest move was to try and get new members elected to the Qualcomm board of directors in order to try and take over the company from within.

The inter-agency panel, led by the Treasury Department, scrutinizes deals that could give foreign firms control of USA companies.

An investigation of the deal by the Committee on Foreign Investment in the US, which reviews purchases of American businesses by foreign investors, confirmed national security threats related to the acquisition by Broadcom, the Treasury Department said in a letter to both companies made public March 12.

CFIUS also notes that Chinese tech companies such as Huawei have already played a key role in developing 5G, and it would be unwise to let it or other Chinese telecoms have such a firm foothold in such a crucial upcoming technology. "This is in large part because of a weakening of Qualcomm's position would leave an opening for China to expand its influence on the 5G standard-setting process".

In other words, Trump saw this as a threat to American innovation, perhaps a deliberate strategy to weaken our ability to develop commercial high-speed communications networks like 5G and other future technologies. The review is apparently going to end soon, but based on the data gathered so far, the investigators could recommend against the arrangement due to national security concerns.

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After imposing tariffs on steel and aluminum imports, Trump is said to be mulling import levies on tech producs and consumer goods from China, on the grounds that the Chinese discriminates against American companies on technology transfer and violates U.S. intellectual property rights. European-based companies could do the same, too.

Can US stay ahead of China?

Qualcomm and Huawei have already conducted joint tests on 5G technology, and both companies are part of an global 5G alliance that includes Nokia, Ericsson and Intel.

Broadcom said such security concerns were not a risk to the closure of the proposed buyout as it never planned to finish the deal before completing moving its official base to the United States.

"The cases [against the deal] as laid out feel very weak to us, but politics is politics", Rasgon wrote earlier in March.

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