US President Donald Trump has scuppered the biggest tech deal in history over fears that the acquisition of US chip-maker Qualcomm by a Singapore-based Broadcom would allow China to dominate the 5G mobile communications market.
Trump blocked the $117 billion takeover bid on Monday, dragging the companies into his escalating trade war with China.
Trump issued a presidential order blocking the deal, claiming to have evidence that the takeover “threatens to impair the national security of the US”.
The decision came amid concerns that if Broadcom, took over Santiago-based Qualcomm, China would have a monopoly over setting standards for the next generation of mobile internet, 5G, shutting US companies out of the market, a White House official told Reuters.
The Committee on Foreign Investment in the US recently penned a letter to the two tech giants, warning them that if Broadcom bought Qualcomm, it would threaten national security and give Chinese companies the competitive advantage over US telcos, the Wall Street Journal reported.
In the letter, the CFIUS raised concerns that the takeover would starve Qualcomm of money for 5G research.
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A shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States.
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.
In an open letter to the US Congress on 9 March, Broadcom promised it would not sell not to sell “any critical national security assets to any foreign companies,” and pledged investments of $3 billion in research and engineering in the US and $6 billion in manufacturing annually.
Why it matters:
The move shows that Trump will not back down from aggressive protectionist trade policies that seek to protect US companies from losing out to global competitors.
It is also seen as the latest salvo launched by the US President at China, branding the country’s trade practices “unfair”.