Some national security experts question whether the US president has the authority to block the deal, given that Singapore-registered Broadcom was in the process of moving its legal base back to America – a move announced with great fanfare by the company’s chief executive Hock Tan at a White House event with Mr Trump just days before he launched the bid for Qualcomm.
Although the presidential action came days after the Committee on Foreign Investment in the United States, an inter-agency group that vets foreign deals, issued a warning against the hostile takeover bid by Broadcom on the grounds that a deal might lead to China overtaking the US in critical 5G technology, it was not expected that Mr Trump would intervene so swiftly.
The potential cuts that Broadcom could have made to Qualcomm’s investment in 5G may have presented a national security risk to the US by effectively handing the lead in the race to develop the next generation of wireless technology to China’s Huawei, says Patrick Moorhead of Moor Insights & Strategy.
Some experts believe that Mr Trump’s move highlights an expensive miscalculation by Broadcom and its advisers rather than an attempt by the US president to mask a protectionist action in the mantle of national security.
Had Broadcom waited until the completion of its corporate move back to the US – the company said on Tuesday that it expected to complete the shift next month – it is unlikely that the takeover of Qualcomm would have been subject to scrutiny from CFIUS. “A US investor does not have to deal with CFIUS,” says one former US official and CFIUS expert, calling Broadcom’s move to rush the deal a “Screw up”.
On Tuesday, Broadcom said it “Strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns”, adding that it would review the order.
“It has done them more harm than good,” says Mr Moorhead. “People inside the Washington beltway – and the technology beltway – will look at this and wonder, ‘Why is Broadcom perceived as such a security risk by the US national government?’ . . . There is no way for Broadcom to challenge this.”