THE PROPOSED TAKEOVER of Qualcomm by Broadcom would put US national security at risk, a US national security panel has warned.
The assertion was made by a senior official working at the US Treasury in a letter to the boards of both Broadcom and Qualcomm, warning them about the government's concerns.
The letter outlines the reservations of the Committee on Foreign Investment in the United States (CFIUS), which predominantly focuses on the fact that Broadcom is a foreign company, with links to other foreign companies that the US believe pose a risk.
Based in Singapore, Broadcom - formerly known as Avago Technologies - has grown fast via a string of acquisitions, taking the name of one of its acquisitions in the process.
On top of that, the semiconductor industry is currently undergoing rapid consolidation, taking out a number of players and reducing competition.
In the letter, deputy investment security secretary Aimen Mir indicated that CFIUS believe that deal would put US security in jeopardy. However, Mir did not reveal the names of the foreign companies Broadcom is allegedly associated with.
Qualcomm published the letter last night. It explained that CFIUS had conducted a national security review of the tabled offer, even though the companies are still only in talks and a long way from agreeing on a deal.
The letter makes it clear that the government often probes companies that it thinks may pose a risk to US infrastructure. It mentioned an unnamed "actor", in particular, that it claims poses a risk.
The warnings in the letter might make Broadcom reconsider its unconditional $8 billion break-up fee, which it says it will even pay if the deal is blocked by regulators.
The CFIUS panel consists of officials from the US defence, justice, treasury, commerce, state, energy and security departments, but it normally only investigates deals after they have been closed.
While the companies the letter cites as a security risk are not disclosed in the letter, they are almost certainly Chinese and relate to Qualcomm's development of 5G mobile communications technologies.
"A shift to Chinese dominance in 5G would have substantial negative security consequences for the United States," claimed the letter.
In a statement, Broadcom responded: "There can be no question that an American Broadcom-Qualcomm combination will provide far more resources for investments and development to that end."
In a bid to assuage US security concerns, Broadcom has lobbied President Trump and promised to re-flag as a US company by shifting its HQ and primary stock market listing to the US. µ
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