Trump's order gives Broadcom few options other than to drop its bid, said Macquarie Securities analyst Srinivas Pajjuri. Last month, the Committee on Foreign Investment in the United States requested 30 days to review the acquisition but, in a characteristically impulsive move, Trump acted before the full investigation has been concluded.
However, a letter published by the CFIUS last week confirmed that the committee was looking at the acquisition unfavourably, in particular, due to "Broadcom's history of slashing research spending and its ability to compromise Qualcomm's assets through relationships with foreign governments".
President Donald Trump's administration is willing to do whatever it takes to prevent foreign companies from gaining an advantage over their US counterparts in a key industry. However, if the takeover would have been successful, China would've had an upper hand in mobile communications.
Since late a year ago, Qualcomm has been in a desperate fight to repel Broadcom's hostile takeover bid.
Before Trump's order, Broadcom had planned to relocate its legal headquarters to the United States, avoiding the need for a CFIUS review. Broadcom moved to Singapore to save money on USA taxes. "In short, US national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation".
Meanwhile, Qualcomm increased the price it was offering for NXP hoping to scuttle the Broadcom deal and told its shareholders they should vote against the merger.
The president concurs. And so endeth the proposed union of Qualcomm and Broadcom, a brief shining dream that nobody seems to have wanted, no one seems to have thought would do anybody much good, and which came with risks to national security that left everyone in the room cold. The US feared that Broadcom would curtail investment in research and development, undermining Qualcomm's position in developing 5G and creating an opportunity for China's Huawei Technologies Co. "All 15 individuals listed as potential candidates on the Form of Blue Proxy Card filed by Broadcom and Broadcom Corporation with the Securities and Exchange Commission on February 20, 2018 (together, the Candidates), are hereby disqualified from standing for election as directors of Qualcomm". It had suddenly realised that Broadcom's takeover would threaten Qualcomm's leadership in developing the next generation of wireless technology.
Fortune contacted Broadcom and Qualcomm for comment and will update this story if they respond. That could allow Chinese companies, namely Huawei Technologies Co, to become the dominant supplier, the USA said. Responding to the intervention, Richard Yu, CEO of Huawei Consumer Business Group, said the United States was using politics to stifle competition.
President Donald Trump has blocked the $117bn takeover of chip maker Qualcomm by Singapore-based Broadcom.
Following news of the order, Broadcom said that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns".