In a letter sent to both Broadcom and Qualcomm lawyers, the CFIUS - a committee made up of representatives from various USA government agencies - cited Broadcom's reputation for research spending cuts and potential national security risks, with the latter concern centered around Broadcom's business relationships with "foreign entities". Instead the CFIUS's unease hinges on Qualcomm being a national champion in the areas of standard-setting and chip R&D and the apparent concern that it would be diminished in this respect once in the suffocating embrace of Broadcom.
Broadcom said it is cooperating with the investigation.
Broadcom's CEO Hock Tan joined US President Donald Trump in the White House previous year to announce he was moving Broadcom's headquarters to the US from Singapore - a move that appeared created to appease US officials and facilitate future acquisitions.
Losing this key role in standards-setting could pose a threat to U.S. national security and also open up a place for China to fill with its own wireless companies, such as Huawei, CFIUS said.
Among the grounds for this fear are the assumption that Broadcom will have to cut back on R&D to pay down the $106 billion of debt it would have to take on to make the acquisition and some public statements from Broadcom that indicate it intends to adopt a "private equity" strategy - i.e. cost-cutting. Washington has always been wary of acquisitions of sensitive technology, particularly by Chinese buyers, but scrutiny has intensified under Trump, according to lawyers who work on such deals.
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Qualcomm included the letter in a filing Monday with the U.S. Securities and Exchange Commission.
They were joined late Friday by five other members of Congress, led by Wisconsin Republican Mike Gallagher.
Broadcom has started a new offensive in its effort to take over Qualcomm, promising to invest United States dollars 1.5 billion to train engineers in the U.S. and make the country a leader in 5G technology. "A disruption of Qualcomm's R & D efforts would in effect hand the growing competition for 5G to China". It lends weight to Qualcomm's argument that the hostile bid would struggle to get regulatory sign-off.
"While the United States remains dominant in the standards-setting space now, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover", the letter said. The company has delayed its annual meeting to April 5. Both trade on the Nasdaq.