Broadcom to Redomicile to USA by April 3

Sean Reid
March 14, 2018

However, U.S. President Donald Trump issued an executive order late on Monday evening to block Broadcom from its $117 billion takeover bid on Qualcomm, citing danger to national security.

In an unusual move, US President Donald Trump blocked Singapore-based Broadcom's $140 billion bid for rival US chipmaker Qualcomm on grounds of national security.

Trump says that there is a "credible evidence" that Broadcom "might take action that threatens to impair the national security of the United States." . The order further bars Broadcom's nominees for standing for election on Qualcomm's board of directors, the route that Broadcom was pursuing after the board of directors previously voted against Qualcomm accepting Broadcom's deal.

An investigation into the deal by the Committee on Foreign Investment in the United States (CFIUS) announced last week, was - claimed Broadcom - initiated following a complaint by Qualcomm directly.

Even though Singapore-based Broadcom is moving its headquarters to the USA, the federal government is still concerned about the company's ties to China, including firms like Huawei.

On the other side of the table, former CEO Paul Jacobs stepped down from his role as Qualcomm's executive director and took a regular board seat instead. Of course, Broadcom "strongly disagrees" with the assessment that the acquisition poses national security risks, and has stated that it is reviewing the order. By allowing Qualcomm to slip into the hands of a foreign country, the US would be left behind. The proposed concerns being, Chins getting the upper hand in mobile communications. Another concern, from a broader industry perspective, is that a united Broadcom Qualcomm entity could control approx 65 per cent of the bill-of-materials that goes into smartphone handsets.

Over the next couple of days, Broadcom bent over backwards to please CFIUS and other critics of the deal.

Less than 24 hours have passed that we reported the plans of Broadcom to shift its headquarters to the simplify the Qualcomm acquisition but a massive wall stands in the way of the Wi-Fi chip manufacturing giant.

Intel, which competes directly with both Qualcomm and Broadcom, was up 2.1% at the time of writing.

And not everyone thinks the USA national security concerns over the deal are justified.

Now that Broadcom has been shoved aside, Qualcomm will be under pressure to prevent its stock price from sinking while trying to complete its own proposed takeover - a proposed $43 billion purchase of NXP Semiconductors. The letter cited concerns about Qualcomm's research and development efforts in 5G connectivity, and the potential that any weakening of those efforts "would leave an opening for China to expand its influence on the 5G standard-setting process". Broadcom will be shifting its headquarters to the U.S., and from there it will be deciding its next move. But now that Broadcom's pursuit has been permanently blocked due to national security concerns, it's worth remembering that Qualcomm is a company with serious problems and an uncertain future.

"Qualcomm funds a lot of the 5G interoperability testing and troubleshooting between device makers like Samsung, carrier equipment manufacturers like Ericsson and networks like AT&T, and I believe this will continue with an independent Qualcomm", Moorhead said.

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