The U.S. government has ordered a national security review of Singapore-based Broadcom's $117 billion bid to acquire U.S. chipmaker Qualcomm, in an unusual move that prompted the latter to delay its March 6 shareholder meeting.
U.S. Republican lawmakers on Monday backed a U.S. panel's decision to delay semiconductor firm Qualcomm Inc (QCOM.O) shareholder meeting to allow for a more extensive review of Broadcom Ltd's (AVGO.O) takeover bid.
"Reduction in Qualcomm's long-term technological competitiveness and influence in standard setting would significantly impact United States national security", the letter said.
It said: "Broadcom's only correspondence with CFIUS was in response to CFIUS inquiries about Broadcom's nomination of directors to the Qualcomm board of directors, and such requests did not reveal that Qualcomm filed to initiate the CFIUS review on 29 January 2018".
A view of the US Treasury building seen in Washington DC
The Treasury Department's concern is both over national security issues and a fear China would be able to gain a strategic advantage in future 5G networks development. "China would likely compete robustly to fill any voice left by Qualcomm as a result of this hostile takeover".
"It's hard to see a good reason why we should hand over one of our leading computer-chip makers, and thereby give Chinese companies a leg-up in the race to develop 5G and the next generation of technology", he added. Tom Cotton of Arkansas.
But Qualcomm, in a press statement, said "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact" and that Broadcom had been interacting with CFIUS "for weeks".
U.S. President Donald Trump hugs Broadcom CEO Hock Tan as Tan announces the repatriation of his company's headquarters to the United States from Singapore during a ceremony in the Oval Office of the White House in Washington, DC on November 2, 2017.
In a statement Monday, Broadcom blamed Qualcomm for spurring the intervention - and called the move by CFIUS "a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees".