A move by Chinese companies to fill the void left by the proposed Qualcomm acquisition and dominate the making of 5G chips permitting faster data transmission would have significant security implications for the USA, the panel found.
It would have been the most valuable tech takeover in the world had it gone ahead. It would also have been the biggest takeover the technology sector had ever seen. The order further bars Broadcom's nominees for standing for election on Qualcomm's board of directors, the route that Broadcom was pursuing after the board of directors previously voted against Qualcomm accepting Broadcom's deal.
That's because Qualcomm is locked in a head-to-head race with China's Huawei Technologies Co. over which company will dominate the development of next-generation wireless technology.
It the second time in recent weeks the President has raised "national security" in trade related matters, having said it was central in his decision to impose hefty tariffs on imported steel and aluminium. "In short, US national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation".
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.
In such a scenario, Broadcom - which now works under the laws of Singapore - would have been considered as an American company and thus its proposed Dollars 117 billion would have been considered outside the preview of a federal agency - the Committee on Foreign Investment in the United States (CFIUS) that reviews foreign deal.
"Qualcomm has become well-known to, and trusted by, the US government", said Deputy Assistant Secretary for Investment Security Aimen Mir.
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Companies may challenge CFIUS's jurisdiction in court but may not challenge the inter-agency panel's national security findings, a CFIUS expert said.
This would likely help Chinese competitors such as telecommunications firm Huawei, particularly in the emerging 5G blazing fast wireless internet, where a stronger China could present a national security issue.
"The CFIUS process focuses exclusively on identifying and addressing national security concerns".
This evening, Republican Duncan Hunter went on the Fox News show "The Story with Martha MacCullum" to speak about the issue of Broadcom being a national security threat.
"And a chip industry merger featuring a company now headquartered in Singapore raises concerns about "Chinese influence", a report in LightReading noted today".
"I get the concerns about China taking our intellectual property etc. but I think they are misplaced in this specific case", Rasgon said.
"This should concern us as a nation".
The move presumably ends months of maneuvering between the two companies over a $117 billion deal that would have been the largest merger in semiconductor history.
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