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Trump blocks Broadcom takeover of Qualcomm on 'national security' grounds

This is the fifth time a US President has blocked a deal based on CFIUS objections and the second deal Trump has stopped since assuming office



US President on Monday blocked microchip maker Ltd's proposed takeover of Inc on grounds, ending what would have been the technology industry's biggest deal ever amid concerns that it would give China the upper hand in mobile communications.

The presidential order reflected a calculation that the United States' lead in creating technology and setting standards for the next generation of mobile cell phone communications would be lost to China if Singapore-based took over San Diego-based Qualcomm, according to a White House official.

San Diego-based has emerged as one of the biggest competitors to China's Huawei Technologies Co in the sector, making a prized asset.

had earlier rebuffed Broadcom's $117 billion bid, which was under investigation by the US Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the US Treasury Department that reviews the implications of acquisitions of by foreign

In a letter on March 5, CFIUS said that it was investigating whether would starve of research dollars that would allow it to compete and also cited the risk of Broadcom's relationship with "third party foreign entities."

While it did not identify those entities, the letter repeatedly described as the leading company in so-called 5G technology development and standard setting.

"A shift to Chinese dominance in 5G would have substantial negative consequences for the United States," CFIUS said. "While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by as a result of this hostile takeover."

A White House official on Monday confirmed that the concerns related to the risks of Broadcom's relationship with third party foreign entities.

A source familiar with CFIUS' thinking had said that, if the deal was completed, the US military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment)."

Shares of rose less than 1.0 per cent to $264.10 in after-hours trade while fell 4.3 per cent to $60.14. said it was reviewing the presidential order.

"strongly disagrees that its proposed acquisition of raises any concerns," it said in a statement in response to the decision. did not respond to a request for comment.

The move by Trump to kill the deal comes only months after the US President himself stood next to Chief Executive at the White House, announcing the company's decision to move its headquarters to the United States and calling it "one of the really great, great "

This is the fifth time a US President has blocked a deal based on CFIUS objections and the second deal Trump has stopped since assuming office.

"The proposed takeover of by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether affected directly or indirectly, is also prohibited," the presidential order released on Monday said.

The order issued by the White House cited "credible evidence" that led Trump to believe that taking control of "might take action that threatens to impair the of the United States."

Trump's move accelerated a decision that appeared likely after CFIUS told in a letter on Sunday that its investigation "so far confirmed the concerns."

The US Treasury Department letter was "obviously a poison pill," Jim Lewis, a CFIUS expert at the Center for Strategic and Studies, said before the Trump order. He described the CFIUS communication to as "unprecedented."

had struggled to complete its proposed deal to buy which had cited several concerns including the price offered and potential antitrust hurdles.

The presidential decision to block the deal cannot be appealed. However, it is not clear what rules would have to follow if it goes ahead with announced plans to move its headquarters to the United States.

First Published: Tue, March 13 2018. 20:39 IST