Qualcomm Drama Delayed Amid National Security Review
08 March, 2018, 02:13 | Author: Edward Snyder
The U.S. government's Committee on Foreign Investment in the United States (CFIUS) has ordered a national security review of the proposed deal, saying a takeover can lead to lower R&D spending and weaken Qualcomm's competitive position against Chinese companies.
At the meeting - previously scheduled for Tuesday - the San Diego company's shareholders are to vote on whether to hand control to Broadcom by putting Broadcom-backed candidates on Qualcomm's board of directors.
The Committee is particularly concerned that if Qualcomm does not maintain its position as one of the top investors in semiconductor research, it could lose its leading position in helping to determine worldwide industry standards. "This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm".
The foreign entities were not named.
Broadcom was based in the USA until 2016, when it was acquired by Singapore-based Avago.
"Broadcom is pledging to create a new $1.5 billion fund with a focus on innovation to train and educate the next generation of engineers in the U.S. This will ensure America's lead in future wireless technology", the company said in a statement.
The letter raised red flags about a Broadcom takeover possibly weakening Qualcomm long-term competitiveness in telecommunications technologies and standard setting - opening the door for Chinese companies such as Huawei to become dominant players in upcoming 5G networks. Harm to Qualcomm's innovation would allow China to expand its influence in key wireless technology, the government said.
Broadcom was forced to delay its annual shareholders meeting two days before it was due to take place after learning Qualcomm had requested the CFIUS investigation, according to CNET.
Broadcom is trying to gain traction for its Qualcomm acquisition efforts with a slate of six nominees for Qualcomm's board of directors.
'Reduction in Qualcomm's long-term technological competitiveness and influence in standard setting would significantly impact U.S. national security, ' the letter said.
To help allay concerns it would reduce spending on technology, Broadcom said it would create a new United States dollars 1.5 billion fund "with a focus on innovation to train and educate the next generation of engineers in the US", the company said, adding this will ensure America's lead in future wireless technology.
"Importantly, Broadcom will fund enhanced R&D through lawful business practices rather than predatory and anticompetitive behavior", Broadcom says.
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