US President Donald Trump blocked Singaporean microchip maker Broadcom Ltd's proposed takeover of Qualcomm Inc, and said in a presidential order that there is "credible evidence" that the deal threatens national security. That could leave the USA hobbled in the race to develop next generation, 5G wireless technology, according to people familiar with the matter.
Thousands of Qualcomm employees went to work Tuesday no longer facing the threat of Broadcom's hostile takeover.
Now that Broadcom has withdrawn its offer, and its nominated directors, it remains to be seen what's going to happen next.
Bringing Broadcom and Qualcomm together would have been the technology industry's largest ever deal.
"Under the terms of the presidential order, all of Broadcom's director nominees are also disqualified from standing for election as directors of Qualcomm", the California-based company said in a statement.
"Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns", the company said. However, Broadcom had already committed to redomiciling its business to the US, and confirmed this week that it would do so by April 3.
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Analysts said Broadcom can still build heft through smaller deals and could have an easier time buying United States targets if it goes through with plans to redomicile in the US.
Technalysis Research president Bob O'Donnell said Broadcom has gained a reputation as a cost-cutter while Qualcomm - which makes most of the world's microprocessors for smartphones - has been focused on innovating.
CFIUS investigated whether "the likelihood that acquisition of Qualcomm by Broadcom could result in changes that affect the security and integrity of supply of goods and services to the USA government in a manner that is detrimental to United States national security".
One explanation appears to be inherent suspicion of Broadcom amongst the "powers that be" in the US.
Broadcom is still seeking major mergers and acquisitions and isn't likely to change course due to the failure of its attempt to seize control of Qualcomm, according to a number of analysts interviewed by Reuters.
Absorbing Qualcomm, Broadcom would have significantly expanded the range of solutions that today are largely limited to chips for Wi-Fi and Bluetooth equipment, and also intended for industrial applications.
One factor that may have pushed CFIUS to move quickly was a unusual maneuver by Broadcom to relocate to the United States.