SEVERE WX : Dense Fog Advisory View Alerts

Why US regulators think Broadcom's bid for Qualcomm could hurt national security

American regulators have held up Broadcom's hostile takeover of Qualcomm over concerns the deal could harm national s...

Posted: Mar 6, 2018 9:01 PM
Updated: Mar 6, 2018 9:01 PM

American regulators have held up Broadcom's hostile takeover of Qualcomm over concerns the deal could harm national security. Now, we know why.

The Committee on Foreign Investment in the United States laid out some of its concerns in a letter to Broadcom and Qualcomm dated Monday. Qualcomm made the letter public Tuesday.

The memo provides rare insight into the thinking of the notoriously secretive inter-agency body, which is chaired by the Treasury Department and vets deals that could give a foreign investor control of a US business.

Late Sunday, the government asked Qualcomm, which is based in San Diego, to delay its annual shareholder meeting by 30 days. The meeting, which had been scheduled for Tuesday, was supposed to determine whether Broadcom could move forward with its bid to combine the two chip makers. If it goes through, it could be the largest technology deal in history.

Broadcom is headquartered in Singapore, but said in November it would move its legal headquarters back to the US.

While many of the specific concerns of CFIUS are classified, the body disclosed that it's looking at "the risks associated with Broadcom's relationships with third party foreign entities," as well as the "national security effects of Broadcom's business intentions with respect to Qualcomm," according to the letter, which was written by a Treasury Department official.

Related: US regulators delay Qualcomm board meeting to review Broadcom bid

One big concern is that the takeover would cause the United States to fall behind on the development of 5G technology, giving China an edge.

Right now, Qualcomm is the "current leading company in 5G technology development and standard setting," according to the memo.

Wireless carriers across the country are about to unleash 5G technology, or fifth generation wireless broadband technology, and Broadcom and Qualcomm will be a major part of that shift.

The US government is worried that if Broadcom takes over Qualcomm, leadership will prioritize short-term profits and cut back on research, causing Qualcomm to lose its competitive advantage. This could allow Chinese competitors in 5G, like Huawei, to gain ground.

"A weakening of Qualcomm's position would leave an opening for China to expand its influence on the 5G standard-setting process," the letter said.

It added: "Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial national security consequences for the United States."

Related: What is 5G?

Qualcomm is known for inventing the 2G and 3G wireless network technology that's used by Verizon and Sprint. It now focuses on mobile chips that power smartphones and radios that enable cellular communications.

Broadcom, meanwhile, primarily makes chips for wired broadband communications, such as modems, Wi-Fi, switches and routers.

The letter also noted that the Department of Defense relies on "continued access to Qualcomm products," and CFIUS will need to determine whether the "security and integrity" of the supply chain will be affected due to the deal.

The regulatory body's intervention in the Broadcom-Qualcomm merger is unusual, particularly because the deal itself is not final. Broadcom's latest offer is $117 billion for Qualcomm. Qualcomm's opposition to the deal has diminished, but the company claims Broadcom's offer is still too low.

-- CNNMoney's Donna Borak contributed to this report.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 306538

Reported Deaths: 5435
CountyCasesDeaths
Marion41953849
Lake26872453
Allen17621295
Elkhart16905219
St. Joseph16524223
Hamilton12696167
Vanderburgh9552115
Tippecanoe844927
Porter813785
Johnson6231165
Vigo597979
Hendricks5944156
Monroe530349
Clark504077
Madison4858121
Delaware4820103
LaPorte457194
Kosciusko455739
Howard334975
Warrick319572
Floyd311477
Bartholomew308462
Wayne301367
Cass295831
Marshall293744
Grant262949
Noble249846
Hancock246551
Boone240254
Henry240237
Dubois234631
Dearborn215730
Jackson212633
Morgan204443
Gibson181725
Knox181419
Shelby178254
Clinton177821
Lawrence174047
DeKalb172829
Adams166422
Wabash158020
Miami157814
Daviess154643
Fayette147733
Steuben143513
Jasper142111
Harrison141824
LaGrange140129
Montgomery139027
Whitley133412
Ripley128114
Decatur124643
Huntington123510
Putnam123027
Randolph120719
Wells120428
White120321
Clay119822
Posey119616
Jefferson116216
Scott103219
Greene101353
Jay96413
Starke90621
Sullivan88916
Fulton83518
Jennings83214
Spencer8198
Perry81521
Fountain7738
Washington7417
Franklin68626
Carroll67913
Orange66628
Vermillion5993
Owen5987
Parke5606
Newton55312
Tipton55226
Rush5317
Blackford51912
Pike50318
Pulaski37710
Martin3515
Benton3362
Brown3353
Crawford2881
Union2671
Switzerland2555
Warren2382
Ohio2307
Unassigned0266

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 371840

Reported Deaths: 6100
CountyCasesDeaths
Franklin50231667
Cuyahoga36047741
Hamilton29931372
Montgomery20065228
Butler14769146
Lucas14317414
Summit13388316
Stark8792197
Warren819175
Mahoning7276299
Lake682666
Lorain643499
Clermont577248
Delaware556436
Licking549276
Fairfield538464
Trumbull5305147
Greene522364
Clark511464
Allen465485
Marion465251
Wood4491107
Medina447756
Miami425867
Pickaway399348
Columbiana347297
Portage344872
Tuscarawas328658
Wayne318793
Richland316638
Mercer289945
Hancock241337
Ross240759
Muskingum240210
Auglaize231031
Putnam224749
Erie224266
Darke223559
Ashtabula223253
Geauga203351
Scioto195915
Union19118
Shelby190615
Lawrence189438
Athens18864
Seneca180018
Belmont164929
Madison158918
Sandusky154229
Preble152621
Huron152318
Defiance139522
Holmes139139
Logan127816
Knox126318
Fulton124525
Washington121927
Crawford121516
Ottawa121130
Clinton106714
Williams10579
Ashland105222
Highland101317
Jefferson10124
Henry100023
Brown9925
Champaign9475
Jackson93112
Hardin91019
Fayette90317
Van Wert8976
Morrow8882
Guernsey83914
Coshocton82613
Perry78712
Adams78313
Pike7451
Gallia73513
Wyandot71216
Paulding64611
Hocking62616
Noble60223
Carroll45710
Meigs39012
Monroe31821
Morgan2575
Vinton2195
Harrison2023
Unassigned00
Fort Wayne
Overcast
52° wxIcon
Hi: 52° Lo: 45°
Feels Like: 52°
Angola
52° wxIcon
Hi: 48° Lo: 42°
Feels Like: 52°
Huntington
Overcast
49° wxIcon
Hi: 54° Lo: 44°
Feels Like: 44°
Decatur
52° wxIcon
Hi: 53° Lo: 46°
Feels Like: 52°
Van Wert
52° wxIcon
Hi: 53° Lo: 46°
Feels Like: 52°
Cloudy Thanksgiving
WFFT Radar
WFFT Temperatures
WFFT National

Community Events