Bloomberg
With his swift rejection of Broadcom Ltd.’s hostile takeover of Qualcomm Inc., President Donald Trump sent a clear signal to overseas investors: Any deal that could give China an edge in critical technology will be swatted down in the name of national security.
Although Broadcom is based in Singapore, China loomed large over the US government’s fears about a foreign takeover of chipmaker Qualcomm. That’s because Qualcomm is locked
in a head-to-head race with China’s Huawei Technologies Co. over which company will dominate the development of next-generation wireless technology.
“This decision hangs a huge ‘not-for-sale’ sign on just about every American semiconductor firm,†said Scott Kennedy, who studies China’s economic policy at the Center for Strategic & International Studies in Washington. “A Chinese entity doesn’t need to be anywhere near a transaction now in semiconductors for the deal to be nixed.â€
The president’s order on Monday blocking Broadcom’s $117 billion bid for Qualcomm is the latest sign of Trump’s tough stance on foreign takeovers of US technology and is part of a broader move to contain China on trade.
The Trump administration is considering clamping down on Chinese investments in the US and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property.
Only five takeovers of American firms have been blocked by US presidents on national security grounds since 1990. Of those, Barack Obama blocked two deals during his two terms. Trump has blocked two in six months.
“There is credible evidence that leads me to believe that Broadcom,†by acquiring Qualcomm, “might take action that threatens to impair the national security of the United States,†Trump said in the order released Monday evening in Washington.
Broadcom said in a statement it was reviewing the order and that it “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.â€
Qualcomm CEO Steve Mollenkopf said in a statement Tuesday that Broadcom must now permanently abandon its takeover attempt.
Trump isn’t the only hurdle to getting deals done. Lawmakers in Washington are moving forward with legislation that would expand the universe of overseas investments that require national security approval from the Committee on Foreign Investment in the US The Trump administration has endorsed the bill, which Senator John Cornyn, a Texas Republican, proposed with China in mind.
“There’s going to be a wake-up call once this passes,†said Timothy Adams, president of the Washington-based Institute of International Finance. “It’s a completely different regime in the US.â€
China has been the leading source of investments reviewed by CFIUS, which is chaired by Treasury Secretary Steven Mnuchin, though its members include the heads of more than half a dozen agencies.
A broadening of the committee’s mandate will raise protective barriers by expanding its authority to reject Chinese investments.