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President Trump Blocks Broadcom's Takeover Of Qualcomm, Citing National Security

In an unusual step, President Trump has signed an executive order blocking Broadcom's $117 billion bid to buy Qualcomm. The order released Monday cited "credible evidence" that led Trump to believe the Singapore-based Broadcom, in purchasing America's largest mobile chipmaker, "might take action that threatens to impair the national security of the United States."

"The proposed takeover of Qualcomm by the Purchaser is prohibited," the president said in his order, "and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited."

Trump said his decision was informed by a recommendation from the Committee on Foreign Investment in the United States, an interagency panel that — in its own words — investigates "transactions that could result in control of a U.S. business by a foreign person." The group evaluates these deals according to their possible effects on national security.

The CFIUS had already openly suggested its concerns with the massive tech merger. Aimen Mir, a top Treasury Department official serving on CFIUS, sent a letter earlier this month voicing those concerns to attorneys representing both companies.

As NPR's Alina Selyukh reports, those concerns center especially on "the future of mobile connections," where Qualcomm has been an industry leader.

"Countries around the world have been racing to develop technology for the new generation of wireless called 5G," she explains. "It will power all the devices that are starting to connect to the Internet — like smart home speakers and even cars."

Though Broadcom is based in Singapore, the principal worry rests with China. If Qualcomm's "technological leadership" diminishes, Mir said in his March 5 letter, Chinese tech companies stand to gain in the race to develop 5G.

"Reduction in Qualcomm's long-term technological competitiveness and influence in standard setting would significantly impact U.S. national security," Mir wrote. "This is in large part because a weakening of Qualcomm's position would leave an opening for China to expand its influence on the 5G standard-setting process."

He also noted that Department of Defense programs rely on access to Qualcomm products.

This weekend, before Trump's order, Mir wrote the same lawyers again, this time to note that the CFIUS investigation "has so far confirmed the national security concerns" identified in his earlier letter.

Broadcom, for its part, had argued earlier Monday — before the president's order — that the national security fears were unwarranted because it plans to redomicile to the U.S. by early April.

"Broadcom, which is in all important respects a U.S. company, has been repeatedly approved by CFIUS in its previous acquisitions of U.S. companies," the company said in its statement, "and has always engaged productively with CFIUS to ensure U.S. national security is protected."

Trump disagreed with this line of reasoning, however. And he said he has directed Treasury Secretary Steven Mnuchin, to send a copy of his order blocking the merger to Qualcomm and Broadcom.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

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