Broadcom Ltd's hostile, $117 billion takeover bid for U.S. chipmaker Qualcomm Inc. presents a potential national security risk that warrants a full investigation, the U.S. Treasury Department said in a March 5 letter, according to Reuters.
The letter reportedly outlined the U.S. government's concern that the merger could provide an opening for Chinese companies like Huawei Technologies to take the lead in developing 5G, the next generation mobile phone networks.
"A shift to Chinese dominance in 5G would have substantial negative security consequences for the United States," Aimen Mir, the Treasury's deputy assistant secretary for investment security, reportedly said in the letter.
The letter was made public by Qualcomm following an order from the U.S. government's Committee on Foreign Investment in the U.S., or CFIUS, to delay the U.S chipmaker's March 6 shareholder meeting.
The national security review panel's order prompted an angry response from the Singapore-based suitor, which said in a statement that "this is part of an unprecedented effort by Qualcomm to disenfranchise its own stockholders." Qualcomm immediately dismissed Broadcom's statement, saying that CFIUS is an independent body that "determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom."
A source familiar with CFIUS' thinking said the U.S. military was concerned that, if Broadcom acquired Qualcomm, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei," Reuters reported.
The letter further said that CFIUS will assess the potential risk of an unnamed "actor" working through Broadcom to hurt the country's national security, according to Reuters, adding that the bulk of the panel's concerns were classified.
