US officially flags Broadcom Qualcomm move as national security issue

Assuming its aim was to scupper Broadcom’s hostile takeover, the Qualcomm board seems to have played a blinder in getting the CFIUS involved.

The US Committee of Foreign Investment in the United States has written a public letter stating that, having had a bit of time to mull the matter over, it has concluded the whole thing looks far too dodgy by half and warrants a much closer look. Specifically it thinks the move could pose a risk to the national security of the US.

The main stated reason for this don’t seem to be any assumption that Singapore-based Broadcom would set about pillaging US state secrets the moment it got its hands on Qualcomm. Instead the CFIUS’s unease hinges on Qualcomm being a national champion in the areas of standard-setting and chip R&D and the apparent concern that it would be diminished in this respect once in the suffocating embrace of Broadcom.

Among the grounds for this fear are the assumption that Broadcom will have to cut back on R&D to pay down the $106 billion of debt it would have to take on to make the acquisition and some public statements from Broadcom that indicate it intends to adopt a ‘private equity’ strategy – i.e. cost-cutting. There is also concern that the supply of Qualcomm tech goodies to the US state may be affected by the move.

Inevitably Broadcom has whacked out a retaliatory PR entitled ‘Broadcom Pledges to Make the U.S. the Global Leader in 5G’. It contains load of promises, vows and oaths to spend loads on R&D, should it manage to acquire Qualcomm. But Broadcom’s announcements are starting to smack of reactive desperation as the political game turns against it.

In contrast to the casual geopolitical xenophobia of the ‘we don’t want our companies acquired by dodgy foreigners’ argument, the fear asset stripping on an unprecedented scale would appear to have a bit more substance. It’s not clear how long this full investigation will take but the smart money surely has to be on the whole thing being called off before long.

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