Trump blocks Broadcom’s hostile takeover of Qualcomm due to national security risks

Broadcom’s hostile takeover of Qualcomm was stopped in its tracks last week after the US began conducting an investigation into the risks the merger posed to national security. The investigation has now come to an end, with President Trump releasing an executive order blocking the acquisition entirely.

Trump didn’t elaborate on how the merger “threatens to impair the national security of the US” beyond “credible reasons,” however it has been speculated that the loss of Qualcomm could result in “substantial negative security consequences” as China becomes the lead in development of 5G technology, according to the Committee on Foreign Investment in the United States (CFIUS).

Broadcom tried to quell these claims but stating that it would not sell “critical national security assets” to foreign firms, alongside allocating a allocate a $1.5 billion fund solely “to ensure US leadership in future wireless technology,” however none of this seems to have pleased the US government.

“The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover,” reads the presidential order. “The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected [sic] directly or indirectly, is also prohibited.”

The chipmaker’s cooperation with the investigation was also called into question, with a clash between Broadcom and federal investigators being suggested in a US Treasury Department letter, which could have impacted on the executive order.

This is welcome news to both Qualcomm, which has rejected Broadcom’s multiple record-breaking offers, as well as Intel, which felt threatened over the dominance in the market a Broadcom-Qualcom merger would have posed. Despite this, Intel might still put in an offer to buy its rival chipmaker regardless of the outcome.

Broadcom, however, is scouring the order, stating that it “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”

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KitGuru Says: It looks like Qualcomm lives to fight another day. Even outside of security implications, I’d have been worried about innovation taking a hit as a result of the merger. If there is less competition, usually there is less need to significantly change products year-on-year, meaning consumers often pay more for less.

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