According to the U.S. government, there could be a possible national security risk in Broadcom’s proposed $117 billion acquisition of Qualcomm. It will generate a full-scale investigation warrant which the U.S. Treasury’s deputy assistant secretary for investment security informed to the two Apple suppliers through a letter.
The deal of proposed hostile takeover of San Diego-based Qualcomm may lead China to overtake the US in sensitive 5G technology. “The government is concerned about Broadcom’s connection with foreign parties,” Aimen Mir wrote in a letter, as confirmed by Reuters yet he did not mention who the parties are.
The letter from the (CFIUS) Treasury’s Committee on Foreign Investment in the US (which can block foreign takeovers of American companies) to Qualcomm issued an order to delay a shareholders meeting by 30 days. But Broadcom is hoping to get six friendly nominees as put forward by them to be elected to Qualcomm’s Board of Directors in order to receive success in this hostile takeover.
CFIUS in a letter to Broadcom and Qualcomm criticized Singapore-based Broadcom’s “private equity-style” plans for Qualcomm, accusing that it would reduce long-term investment in research and development in search of quick profits.
In a letter by CFIUS, it said, “ Reduction in Qualcomm’s long-term technological competitiveness and influence in standard settings would significantly impact US national security.”
With a source reporting Reuters said CFIUS is stressed due to the concerns in the US military that if Broadcom buys Qualcomm, China’s Huawei may indirectly gain dominance in 5G cellular development since Huawei shares close ties with China, therefore, there are possibilities to use the 5G development as a strategic advantage. Sources close to Qualcomm claimed that the letter sent to both companies reduced Broadcom’s chances of acquiring the company.
Although Apple depends on Qualcomm for cellular chips, the two companies are engaged in a global legal battle over patents and royalties. Hence Broadcom Qualcomm acquisition would be rewarding to Apple as there would involve the chance to terminate the lawsuits and beginning of beneficial deals.