US panel: Broadcom's Qualcomm bid is a potential national security risk
A federal regulatory panel has concluded that Broadcom's successful hostile takeover attempt of Qualcomm -- or any potential merger between the two companies -- "could pose a risk to the national security of the United States," according to a letter from the Treasury Department, dated March 5.
Qualcomm made the letter public on Tuesday, effectively confirming its explanation for delaying its Annual Meeting. The meeting was slated for Tuesday, but it was delayed earlier in the week at the request of the Committee on Foreign Investment in the US (CFIUS), due to the security issues surrounding the potential deal.
Broadcom slammed Qualcomm's request for the CFIUS to investigate the deal, calling it "engagement theater." Broadcom also claimed that Qualcomm did not disclose the request to Broadcom. The delayed meeting and CFIUS investigation are the latest roadblocks the Singapore-based Broadcom has faced in its attempts to acquire Qualcomm.
The letter published Tuesday said that CFIUS has been "communicating with both parties" for weeks and has so far assessed "information provided in our multiple phone calls, emails and meetings with representatives of both Qualcomm and Broadcom."
The risks of the potential deal "warrant a full investigation." While the risks are largely classified, the letter did say they "relate to the risks associated with Broadcom's relationships with third party foreign entities and the national security effects of Broadcom's business intentions with respect to Qualcomm."
The proposed deal could weaken Qualcomm's standing and leave an opening for China to exert more influence over 5G standard setting, the letter continues. CFIUS also intends to investigate whether the deal would limit the supply of Qualcomm products or services to the US government, or whether it would threaten the integrity of those products and services.