U.S. gov: 'potential risks' with Broadcom's Qualcomm deal

Citing security Republicans support CFIUS review of Broadcom bid for Qualcomm 0

The US government, including the Department of Defense, also source sensitive technologies from Qualcomm. 6, a move it has argued should not make it subject to a review on national security concerns.

The Committee on Foreign Investment in the United States (CFIUS), which reviews deals for potential national security concerns, rarely reviews mergers before companies have clinched an agreement.

Broadcom said it is run by a board of directors and senior management team consisting nearly entirely of Americans.

Bloomberg reported Monday that Broadcom's board candidates were getting substantial support from angry Qualcomm shareholders in early voting. While much of the CFIUS' national security concerns were not detailed in the letter due to their classified nature, the board did mention worries around Broadcom's "relationships with third party foreign entities and the national security effects of Broadcom's business intentions with respect to Qualcomm".

Qualcomm agreed to put its annual shareholder meeting on hold this week to allow the CFIUS to conduct an investigation into Broadcom's efforts.

"There can be no question that an American Broadcom-Qualcomm combination will provide far more resources for investments and development", Broadcom said in a statement. The Motley Fool owns shares of Qualcomm. Broadcom, which is based in Singapore, has its co-headquarters in San Jose, and is in the process of moving its entire legal headquarters to the United States this year. Its sale could leave America more dependent on foreign suppliers.

Several proposed takeovers by overseas investors have fallen apart over the past year after failing to resolve the concerns. He has proposed legislation to tighten CFIUS' scrutiny of deals.

Nevertheless, the Treasury Department's letter shows that the U.S. government is clearly anxious about the security ramifications with any deal. "Whereas it may have been the case in the previous administration that certain risks could be tolerated and perhaps addressed through mitigation, those risks are not as well tolerated anymore, and it is a higher bar you have to clear".

The deal's pushback on national security grounds is seen by some as trade posturing by the Trump administration against China.

Qualcomm included the letter in a filing Monday with the U.S. Securities and Exchange Commission.

A Qualcomm spokesperson was not immediately available for comment.

At present, Qualcomm, the largest 4G chipset manufacturer in the world, is competing with Chinese companies like Huawei over 5G chipset development. Huawei has always been seen by the U.S. as a security threat. The multi-agency body is headed by the Treasury.

Broadcom says it will earmark $1.5bn for funding of 5G wireless broadband networks as part of its proposed acquisition of Qualcomm.

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