Broadcom cries foul as U.S. regulator intervenes in Qualcomm saga

08 March, 2018, 01:34 | Author: Irene Delgado
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However, Qualcomm has been resisting Broadcom's overtures, prompting the latter to nominate six directors to Qualcomm's 11-member board at its shareholder meeting.

"Having a well-known and trusted company hold the dominant role that Qualcomm does in the USA telecommunications infrastructure provides significant confidence in the integrity of such infrastructure as it relates to national security".

Qualcomm just concluded its 5G day in San Diego, California, where it showed off a number of new demos showcasing what the new Snapdragon 845 can do.

Broadcom has been telling shareholders Qualcomm sought a review by the Committee on Foreign Investment in the United States and didn't tell its shareholders or Broadcom.

Broadcom's ongoing attempt to acquire Qualcomm, a deal that would be the largest tech merger in history, hit another roadblock this week when the U.S. government chose to intervene. The letter caused Qualcomm to delay a critical shareholder vote on the meeting by 30 days. The US government has already expressed repeated concerns about Huawei and ZTE, moving to close off their access to the American market, and the fear is Broadcom could allow the Chinese to take the lead on setting 5G standards.

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Broadcom was based in the U.S. until 2016, when it was acquired by Singapore-based Avago.

The US government, including the Department of Defense, also source sensitive technologies from Qualcomm. Specifically it thinks the move could pose a risk to the national security of the US. Reuters reported last week that CFIUS had begun looking at semiconductor firm Broadcom's bid as pressure grew from politicians, including senior Republican Senator John Cornyn. While much of the CFIUS' national security concerns were not detailed in the letter due to their classified nature, the board did mention worries around Broadcom's "relationships with third party foreign entities and the national security effects of Broadcom's business intentions with respect to Qualcomm". It lends weight to Qualcomm's argument that the hostile bid would struggle to get regulatory sign-off.

The panel also advised against a deal between Chinese-backed private equity firm Canyon Bridge and US chipmaker Lattice Semiconductor Corp, leading president Trump to block the proposal in September 2017.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology. The CFIUS letter noted that Broadcom has not elaborated on how it plans to change Qualcomm's licensing model, but appeared to side with Qualcomm's claim that its current model is needed to support R&D funding.

The United States Department of the Treasury said that the CFIUS now can look into Broadcom's acquisition plan in depth. The company is now based in Singapore, but said in November that it will move its legal headquarters back to the United States.

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