Qualcomm Takeover Could Pose Security Risk, US Treasury Says

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The U.S. government has outlined key concerns about Broadcom 's proposed merger with Qualcomm, including national security and a risk that Qualcomm could lose ground to China on developing 5G wireless network technology. Broadcom is also looking to become a US company registered in business friendly DE, before the stockholder vote.

"Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm's Annual Meeting 48 hours before it was to take place", it said in the statement.

Today, Qualcomm stockholders were supposed to vote on the make up of the company's Board of Directors. A Treasury Department official, representing the Committee on Foreign Investment in the United States, said the merger could pose a risk to national security and that the committee would further investigate the transaction.

A shift by Chinese companies to dominate 5G "would have substantial negative national security consequences for the United States", the Treasury said.

"It's hard to see a good reason why we should hand over one of our leading computer-chip makers, and thereby give Chinese companies a leg-up in the race to develop 5G and the next generation of technology", he added.

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Qualcomm also holds a number of government contracts, particularly classified and unclassified work for the Department of Defense, which the Treasury seeks to protect. Ordinarily, it only weighs in after a deal is agreed upon - and can recommend that the president block any deal it considers a threat.

Singapore-based Broadcom has been working for weeks on a takeover of rival Qualcomm.

Broadcom has struggled to complete its proposed deal to buy Qualcomm as the latter has resisted, citing several concerns including the price offered and potential antitrust hurdles.

Qualcomm rejected a $105 billion offer from Broadcom in November. Currently, Broadcom is part of Broadcom Limited located in Singapore.

The government's move though could now spoil Broadcom's efforts to take over the American company.