Broadcom said it was reviewing the presidential order, noting that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns". He called the proposed merger between Qualcomm and Broadcom a direct threat to America's national security.
"The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited", Trump said in the executive order issued today.
In November 2017, a few days before Broadcom announced the $117 billion offer to acquire Qualcomm, the company's CEO Hock Tan announced during a White House visit that Broadcom's headquarters would be moved from Singapore to the U.S. The company is set to complete its headquarters relocation by April 3.
"Any transaction or other device entered into or employed for the objective of, or with the effect of, avoiding or circumventing this order is prohibited", Trump wrote in the order.
Trump, in his executive order, said there is "credible evidence" that leads him to believe that if Broadcom Limited took control of the San Diego-based Qualcomm it "might take action that threatens to impair the national security of the US". CFIUS cited Broadcom's thrifty approach to R&D and argued that the Singapore-based company would likely cut costs at Qualcomm, which would in turn weaken its ability to compete against Chinese telecoms rivals such as Huawei. For instance, Qualcomm is viewed as being ahead of the curve in the development of next-generation 5G wireless technology, and the USA government likely thinks that ceding control to Broadcom could allow Chinese companies such as Huawei to become leaders in this crucial space going forward. The deal would have been the biggest technology sector takeover on record.
Though Broadcom is based in Singapore, the principal worry rests with China.
First, it appears that Broadcom doesn't yet have a Plan B. It will also weaken the position of the U.S. and Huawei will take a leading position, according to a Bernstein chip analyst, named Stacy Rasgon.
The company's prospects in the largest Asian market have grown brighter just as its relations with its most important customer, Apple, have soured considerably over the chip giant's licensing practices. "What is unusual is blocking the sale on national security grounds for a non-defense-related company".
"This decision is based on the facts and national security sensitivities related to this particular transaction only and is not meant to make any other statement about Broadcom or its employees, including its thousands of hardworking and highly skilled United States employees", Mnuchin said.
Broadcom, which had pledged to move all its headquarter functions to the USA if it won the day, said it "strongly disagreed" with the reasoning behind the decision.
Hunter said the merger would make Broadcom the third largest chipmaker in the world, "giving them control over a major portion of the supply chain, which is critical to the vital communications components". If Qualcomm's "technological leadership" diminishes, Mir said in his March 5 letter, Chinese tech companies stand to gain in the race to develop 5G. "There is certainly an argument that wireless IP/semiconductors are essential to national security".