Trump Blocks Broadcom, Qualcomm Tech Deal

President Trump has blocked a Singapore-based company from taking over a major American tech firm. He says the proposed Broadcom buyout of Qualcomm posed a credible national security risk.

The deal would have been the biggest in tech history. Qualcomm makes a wide range of computer and gadget components with a particular emphasis on those used in communications devices such as phones. It helped develop key systems used to carry data over cellphone networks, allowing smartphones and tablets to get Internet access without relying on WiFi.

Broadcom had offered $140 million to buyout Qualcomm. The proposed deal was partly about cost-savings in combining two companies that compete in the same field, and partly to access Qualcomm's existing work on the components that will be needed for phones to use the forthcoming high-speed 5G networks.

Competition Not The Legal Issue

Despite the scale of the proposed deal, it wasn't eligible to be reviewed on competition grounds. That's because although Broadcom has a major base in San Jose, it's legally incorporated in Singapore.

Instead, the deal was being reviewed by a government panel that vets major deals for security issues. Although the panel had mentioned having concerns, it had yet to formally report on its conclusions.

Rather than wait for the panel report, Donald Trump decided to exercise his powers under the Defense Production Act. That's a law dating back to the Korean War that means the President can sometimes force businesses to act in a particular manner in the interests of national defense.

Trump Cites 'Credible Evidence'

Trump wrote that "There is credible evidence that leads me to believe that Broadcom Limited... through exercising control of Qualcomm Incorporated... might take action that threatens to impair the national security of the United States." (Source: whitehouse.gov)

The executive order quashing the deal didn't go into detail. One member of the government panel says the main concern wasn't so much Broadcom itself, but rather the fear that the deal - although with a Singapore company - might have helped China become dominant in the development of 5G technology. White House officials fear that could risk the Chinese government seeking the ability to intercept calls and data use on such networks.

Such presidential interventions are rare. This one was particularly unusual as it came before shareholders at Qualcomm had decided whether or not to accept the buyout offer. Indeed, Qualcomm management had asked the government to vet the deal, sparking some suggestions the decision is as much about protecting US business as it is security. (Source: nytimes.com)

What's Your Opinion?

Was the President right to block the deal? Should he have waited for the panel report to complete? Do you think security or business was the main factor in the decision?