Why US regulators think Broadcom's bid for Qualcomm could hurt national security

Why US regulators think Broadcom's bid for Qualcomm could hurt national security

Why US regulators think Broadcom's bid for Qualcomm could hurt national security

The issues mentioned in the CFIUS correspondence dealt with Broadcom's habit of paring spending on research, and fears that the deal could result in security risks to the us if Qualcomm's assets are exploited by "third party foreign entities".

"Such an investigation is often a death knell for a corporate acquisition", the Times wrote.

A government panel, the Committee on Foreign Investment in the United States, noted, in part, that the potential risk was related to Broadcom's relationships with foreign entities, according to a letter from a U.S. Treasury official.

"China would likely compete robustly to fill any voice left by Qualcomm as a result of this hostile takeover". In most cases, it operates in secret and weighs in after a deal is announced.

The letter and its subsequent investigation is the latest twist in what could be the largest-ever tech acquisition.

The move reflects increased worries about overseas deals and about Chinese influence in central industries like technology. It also noted Broadcom's practice of spending more on acquiring companies than on internal R&D.

Authorize CFIUS to exempt certain otherwise-covered transactions if all foreign investors are from a country that meets certain criteria, such as being a US treaty ally and having a mutual investment security arrangement. According to the Financial Times, Broadcom, which was a USA company before acquisition by Singapore's Avago Technologies, has cooperated with Huawei for long and US politicians are concerned about this fact.

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Broadcom tried early on to quell concerns about the deal, announcing a year ago that it would move its headquarters to the United States. CFIUS rules allow a company facing an unsolicited takeover bid to request a CFIUS review, so that its board of directors can better assess the regulatory risk of a deal.

The Department of Treasury broadened the scope of the inquiry to look at Broadcom's hostile takeover bid as well.

Reuters says the United States asked Qualcomm to postpone a shareholder meeting so it can scrutinize Broadcom's bid for the chipmaker.

It added: "Given well-known USA national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial national security consequences for the United States". "Articulation of the potential national security concerns, in significant part, is classified".

China, the letter said, could take advantage of any weakness.

Huawei is forging closer commercial ties with big telecommunication operators across Asia, the Americas and Europe, putting the company in prime position to lead the global race for wireless 5G networks, despite US allegations it poses a security threat. "For example, Huawei has increased its R&D expenditures and owns about 10% of essential 5G patents", although the US still dominates in 5G patents, it said.

Broadcom is not a Chinese company, and has pledged to move its domicile from Singapore to the United States, arguing this will makes its acquisition of Qualcomm not covered by CFIUS.

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