US Broadcom Probe Cites Fears China Could Dominate 5G

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US officials worry that if Broadcom succeeds in its hostile takeover of Qualcomm, that might weaken the San Diego chipmaker and open the door for China to become the leader in next-generation wireless technologies, among other national security concerns.

The CFIUS said it views 5G as important for us national security, and that it was concerned about the potential for Chinese tech companies getting more influence into 5G development in the United States.

Some on Wall Street and in government have been vociferously against the proposal, partly because of the idea that Broadcom might cut Qualcomm jobs, but also because of the importance of the companies' products-chips for telecommunications equipment-in the upcoming wave of "5G" mobile broadband technology.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees", Broadcom said in a statement.

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Qualcomm has pushed a crucial shareholder vote scheduled for March 6 back by 30 days as a result of the national security review. The company has delayed its annual meeting to April 5.

United States regulators have cited concerns over China's influence on the 5G standard-setting process in announcing an investigation into Singapore-based Broadcom's hostile takeover of Qualcomm.

Broadcom did not mention CFIUS in its announcement on Wednesday but said the company intends to "maintain the [research and development] resources Qualcomm devotes to 5G and innovation in future wireless standards". If it achieves its goal of acquiring Qualcomm, Broadcom said it expects to have more than 25,000 employees in the U.S.

The $106 billion (£76bn) of debt Broadcom has arranged to finance the $117bn deal could also increase pressure to focus on short-term profits, Mir wrote.

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Broadcom's ongoing attempt to acquire Qualcomm, a deal that would be the largest tech merger in history, hit another roadblock this week when the United States government made a decision to intervene. But it now appears willing to continue to pursue its bid for Qualcomm through the CFIUS review, said Bernstein Research Analyst Stacy Rasgon in a research note.

Qualcomm also is a product supplier to the USA government and is working with it on cybersecurity for the next generation of wireless, 5G and the Internet of Things, according to the letter.

Qualcomm's shares slipped 41 cents to $64.33, while Broadcom's were down $1.46 at $249.41.

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