Business & Tech

US blocks Broadcom from buying Qualcomm

President Trump cited national security concerns in blocking the acquistion.
Graham Walzer/New York Times
President Trump cited national security concerns in blocking the acquistion.

WASHINGTON — President Trump on Monday blocked Broadcom’s $117 billion bid for the chip maker Qualcomm, citing national security concerns and sending a clear signal that he was willing to take extraordinary measures to punctuate his administration’s increasingly protectionist stance.

In a presidential order, Trump said there was “credible evidence” that led him to believe that if Singapore-based Broadcom were to acquire control of Qualcomm, which is based in San Diego, it “might take action that threatens to impair the national security of the United States.”

The decision underscored the lengths that the president is willing to go to shelter US companies and ward off foreign investment in the United States. In recent weeks, he has turned to an arsenal of tools — including tariffs and an obscure government panel that reviews foreign investments — to protect American industries and to thwart the rise of China in particular.

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The move follows one by the Committee on Foreign Investment in the United States, which typically works behind closed doors and reviews deals only after they are announced, earlier this month to stall Broadcom’s bid because of national security concerns.

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Last week, Trump also approved stiff and sweeping tariffs in the name of national security, saying that steel and aluminum imports were a threat to US manufacturing. Trump has singled out Chinese steel as a key factor in his decision; he has said China has routed steel through other countries and flooded the United States with cheap metal.

While Broadcom is a Singapore-based company, China was also the main concern that fueled Trump’s decision over the Qualcomm deal. The administration’s unease stemmed from a view that allowing a US-based technology company to be acquired would cede its primacy in the semiconductor and wireless industry and allow China to flex its muscle and gain a competitive technological advantage.

Treasury Secretary Steven Mnuchin said in a statement that the decision was part of the administration’s “commitment to take all actions necessary to protect the national security of the United States.”

He said the order was based “on the facts and national security sensitivities related to this particular transaction only and is not intended to make any other statement about Broadcom or its employees, including its thousands of hard working and highly skilled US employees.”

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Yet the order will undoubtedly raise questions about the extent to which the Trump administration is willing to intervene in private-sector decisions. While Qualcomm was opposed to the merger, the proposal was headed to the company’s shareholders for a vote on whether the offer was in the firm’s best interest. The foreign investment committee intervened before that could happen, refusing to let the shareholder meeting take place until after it had a chance to investigate.

The president said his decision had been based on the review by the committee, which focused on how Broadcom’s purchase of Qualcomm might affect next-generation high-speed mobile networks known as 5G.

The panel said that the leadership of Qualcomm, which makes wireless chips and also licenses key wireless patents, was too important to put into hands of a company with links to China. The committee argued that economic leadership in 5G was also a national security interest.

Under Trump, several deals involving foreign buyers have been squelched after a review by the committee, including Moneygram’s sale to an affiliate of the Alibaba Group and Lattice Semiconductor’s sale to an investment firm with reported ties to the Chinese government. But the action against Broadcom was unusual because mergers are rarely killed before a publicly traded company’s shareholders are given the chance to decide for themselves.

“China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,” a US Treasury official wrote in a letter last week to the companies.

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A presidential action against foreign investment in a US company is rare and has only taken place four times in the past 30 years, according to the law firm Ropes & Gray.

Broadcom and Qualcomm did not immediately respond to requests for comment.