Broadcom bid for Qualcomm is said to raise US security concern | Mint
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Business News/ Industry / Manufacturing/  Broadcom bid for Qualcomm is said to raise US security concern
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Broadcom bid for Qualcomm is said to raise US security concern

Broadcom's hostile bid for Qualcomm is drawing the attention of a secretive US panel that reviews whether acquisitions of American companies raise national security concerns

US security officials raised concerns about Broadcom in the past. Photo: ReutersPremium
US security officials raised concerns about Broadcom in the past. Photo: Reuters

Washington: Broadcom Ltd.’s hostile bid for Qualcomm Inc. is drawing the attention of a secretive US panel that reviews whether acquisitions of American companies raise national security concerns, according to two people familiar with the matter.

The Committee on Foreign Investment in the US, which conducts its reviews far from the public eye, is split on whether to review Broadcom’s hotly contested effort to win control of its rival, said the people, who declined to be named because the discussions are confidential.

The Pentagon, which serves on CFIUS, supports a review by the panel, while the Treasury Department has pushed back, the people said. Treasury has argued the panel lacks jurisdiction, one of the people said. Officials there are also concerned about being used as a bargaining chip in the takeover battle between the two companies, said the other person. Qualcomm, fighting to stay independent, has already warned an acquisition would face regulatory scrutiny.

A review by the security panel would add another regulatory hurdle for an acquisition that would need to win antitrust approvals around the world. Chief executive officer Hock Tan joined US President Donald Trump in the White House last year to announce he was moving Broadcom’s headquarters to the US from Singapore—a move that appeared designed to appease US officials and facilitate future acquisitions.

US security officials raised concerns about Broadcom in the past. CFIUS was worried its purchase of Brocade Communications Systems posed a security risk because of Broadcom’s ties to China, according to the people. That deal went through after Tan’s visit with Trump.

Broadcom, which makes semiconductors and competes with Qualcomm, is looking to advance its bid on 6 March, when Qualcomm investors are scheduled to vote on whether to give Broadcom a majority on Qualcomm’s board of directors. That could set up a board vote to accept Broadcom’s offer.

Broadcom said it remains confident it would get all necessary regulatory approvals to buy Qualcomm within a year, according to a company spokesman. If Broadcom’s nominees win seats on Qualcomm’s board, they will have a duty to act in Qualcomm’s best interests, the spokesman said.

In May, Broadcom shareholders are due to vote on domiciling the company in the US. All but one of its executive officers and board members, including the CEO, are US citizens, the spokesman also said. Qualcomm declined to comment. CFIUS reviews are confidential, and the panel doesn’t confirm or comment on its work.

Foreign acquisitions of sensitive US technology like semiconductors tend to draw heightened scrutiny from CFIUS, as do acquisitions by Chinese buyers. President Trump last year blocked a Chinese-backed takeover of Lattice Semiconductor Corp. because of the importance of semiconductors to the US government and China’s role in the proposed acquisition, according to the White House.

Part of CFIUS’s concerns over the Brocade deal stemmed from Broadcom’s ties to Huawei Technologies Co., according to one of the people. Huawei, China’s largest maker of telecom equipment, was blacklisted in 2012 along with China’s ZTE Corp. when the US House Intelligence Committee cited security risks posed by the companies. Huawei uses Broadcom’s chips in networking products such as switches that direct data traffic between connected computers.

Qualcomm also works with Huawei. The two said on 21 February they completed testing on technology that advances faster 5G mobile services.

Republican senator John Cornyn of Texas on Monday wrote to treasury secretary Steven Mnuchin urging CFIUS to review the matter, saying Qualcomm is the only US company capable of leading research and development of 5G technology. Bloomberg

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Published: 01 Mar 2018, 08:17 PM IST
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