Singapore-based mobile chip manufacturer Broadcom’s $117 billion bid to acquire its US rival Qualcomm—what might have been the largest tech deal in history—was shot down by the White House on Monday, with President Donald Trump allegedly making the decision over unspecified national security risks.
In a statement to CNBC, the White House wrote on behalf of the president, “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.”
According to CNBC, Trump issued an order requiring both companies to “immediately abandon the proposed deal” as well as prohibiting Broadcom-proposed candidates from running for Qualcomm’s board.
The Wall Street Journal reported that the move was likely motivated by the findings of the Committee on Foreign Investment in the US (CFIUS), which reviews deals involving foreign companies to assess them for possible security risks. CFIUS had warned that Broadcom had violated one of its orders to notify them before taking any action to relocate its headquarters to the US, which is a step the company had apparently been considering in an effort to relax concerns about possible national security effects of the deal.
Trump had previously thrown an event with Broadcom CEO Hock Tan bragging that the company had plans to relocate to the US, making this matter all the more confusing. Trump eagerly touted the company’s Fortune 100 status, said it was part of a pattern of jobs coming back to the US under his tenure, and happily watched as Tan claimed the relocation would bring $20 billion in revenue to the US.
Per the Journal, CFIUS was concerned that Broadcom would slash Qualcomm’s research and development division, which could result in foreign competitors beating US companies on emerging technology like 5G. Because this is the Trump administration we’re talking about, it seems like the concerns largely center around China.
“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,” a CFIUS official wrote to the two companies, the Journal reported.
Update 9:00pm ET: Broadcom is obviously not happy about this. In a statement picked up by Axios’ Dan Primack, the company said it will be “reviewing” the order, which seems like it could possibly be a prelude to a legal response.