Trump blocks Broadcom takeover of Qualcomm citing national security risk
President Donald Trump has quashed Singapore-based Broadcom's hostile pursuit of U.S. chipmaker Qualcomm citing national security concerns, the White House said in a statement on Monday.
The directive restricts Broadcom from acquiring, taking over or merging with Qualcomm, according to a statement obtained by Axios. A separate report from CNBC highlights the reasoning behind Trump's decision.
"There is credible evidence that leads me to believe that Broadcom Limited, a limited company organized under the laws of Singapore (Broadcom)...through exercising control of Qualcomm Incorporated (Qualcomm), a Delaware corporation, might take action that threatens to impair the national security of the United States," the White House said.
Under the order, both companies must cease all efforts toward an acquisition.
The news comes just hours after Broadcom made public plans to redomicile to the U.S., a move designed in part to sidestep a Committee on Foreign Investment in the United States (CFIUS) investigation into its proposed Qualcomm takeover. The panel was concerned that Broadcom's purchase of Qualcomm would weaken the chipmaker's standing in the semiconductor industry. Broadcom's ties with foreign entities were also of concern.
"Given well-known U.S. 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," CFIUS said in a letter dated March 5.
A previous CFIUS letter dated March 4 instructed the company to provide five business days' notice before taking action to redomicile.
Following word of the CFIUS investigation, Broadcom on March 6 requested a hearing with the Singapore Court. The court "directed" Broadcom to hold a shareholder meeting on March 23 to decide its proposed redomiciliation, the company said in a Securities and Exchange Commission filing.
Both Broadcom and Qualcomm are Apple suppliers, though it was Apple's legal battle with Qualcomm that in part spurred Broadcom's now blocked acquisition attempt.
Qualcomm saw profits plummet over the past months due to an ever-growing legal battle with Apple, as well as related government investigations into the chipmaker's business practices. Apple was first to file last year when it leveled a $1 billion suit claiming Qualcomm withheld royalty payments in retaliation for Apple's cooperation in a South Korean antitrust investigation. Further, the tech giant asserts Qualcomm flouts FRAND (fair, reasonable and nondiscriminatory) patent commitments to charge customers exorbitant royalty rates on standard-essential patents and participates in monopolistic practices, price gouging, extortion and other nefarious acts.
Qualcomm launched its own legal salvo in retaliation, filing a series of countersuits asserting Apple breached contractural agreements. The chipmaker contends Apple's legal maneuvering is merely a ploy to garner favorable licensing fees.