Last week, Treasury official argued deal would let China dominate 5G development. Had the proposed deal gone through, it would have allowed the Singapore-based Broadcom to purchase the San Diego-based Qualcomm for $117 billion. The hostile takeover also would have been the biggest deal in the history of the tech industry. The order, which did not fully explain on what basis the president made this assessment, suggests that the Trump administration is willing to protect American companies against foreign competitors even more than some had realized. Trump recently ordered that tariffs on imported steel and aluminum be put in place, propping up those American industries. Trump's executive order comes a week after the Department of the Treasurys Committee on Foreign Investment in the United States came to a similar conclusion. In a four-page letter, Aimen N. Mir, Deputy Assistant Secretary for Investment Security, wrote that the national security concerns stem from the fact that: ...a weakening of Qualcomms position would leave an opening for China to expand its influence on the 5G standard-setting process. Chinese companies, including Huawei, have increased their engagement in 5G standardization working groups as part of their efforts to build out a 5G technology. For example, Huawei has increased its expenditures and owns about 10 percent of 5G essential patents. While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover. Broadcom is expected to lessen Qualcomms research and development in favor of short-term profitability — in other words, China cant be given the opportunity to dominate 5G, Mir suggested. Non-Qualcomm SoCs usually require a separate modem, which takes up more space in the already tight smartphone design. In short, non-Qualcomm-powered phones are generally inferior and more expensive to make. On November 2, 2017, Broadcom CEO Hock Tan appeared with Trump at the White House and promised to "re-domicile" the company in Delaware. (The company, while officially based in Singapore, is currently co-headquartered in San Jose, California.) "I am American, as are nearly all my direct managers, my board members, and over 90 percent of my shareholders," Tan said. "So today, we are announcing that we are making America home again. Thank you. Our commitment to re-domicile into the United States is a huge reaffirmation to our shareholders, to the 7,500 employees we have across 24 states in America today, that America is once again the best place to lead a business with a global footprint. Thanks to you, Mr. President, business conditions have steadily improved." However, such a move does not appear to have taken place. Adding to the intrigue, last Friday, the Wall Street Journal reported that Intel is interested in buying Broadcom. In a two-sentence statement issued Monday evening after the executive order, Broadcom wrote: "Broadcom is reviewing the order. Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns."
Hoping to avoid a prolonged national security review, Singapore-based Broadcom said it will move its international headquarters back to the U.S. by April 3 as it continues a hostile takeover bid for rival Qualcomm. In a press release today, Broadcom confirmed the date for the first time while also emphasizing its roots in the U.S. Indeed, the whole snarled mess surrounding the notion of a foreign company buying a prize like Qualcomm goes right to the heart of what one means by U.S. company. Politicians are worried by the thought of an Asia-based company seizing control of Qualcomm, which is emerging as a leader in next-generation 5G chips. Qualcomms board has fought the bid since last November even as Broadcom raised the price to $121 billion. Last week, the U.S. Treasurys Committee on Foreign Investment in the United States (CFIUS) released a letter saying it was reviewing the transaction for national security risks, putting the deal temporarily on hold. This was not entirely surprising and was one of the reasons Broadcom announced at a ceremony with President Trump last November that it plans to relocate to the U.S. The company said in its press release today that it supports the CFIUS process and noted that the agency had previously reviewed and cleared its acquisition of Brocade in November 2017. At the close of that transaction, Broadcom agreed to relocate. The move to the U.S. will be a homecoming for a company that in many ways never really left. Broadcom began life in Irvine, California as a fabless semiconductor company. It was acquired in 2016 by Avago Technologies, which started as a product division of Hewlett-Packard and was spun off in 1999 into Agilent Technologies. After that deal, Avago renamed itself Broadcom and established joint headquarters in Singapore and San Jose. In many ways, what Broadcom refers to as a plan to redomicile to the U.S. is a largely symbolic move. The company hasnt said how many executives or what, if any, operations may be shifted. But it emphasized that it believes the change should eliminate any fears around national security. In short, U.S. national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation, the company said. Whether that does actually satisfy the CFIUS remains to be seen. Meanwhile, amid delays in reaching a deal, rumors have emerged that rival Intel is considering making a bid for Broadcom.