Broadcom Ltd.’s hostile takeover attempt of Qualcomm Inc. could pose a national security risk because of Qualcomm’s leadership in developing critical semiconductor technology, according to the U.S. Treasury Department.
Qualcomm’s sale to Singapore-based Broadcom could hurt the chipmaker’s competitiveness by reducing research and development, which would threaten U.S. security, Treasury said in a March 5 letter released by Qualcomm Tuesday. Harm to Qualcomm’s innovation would allow China to expand its influence in key wireless technology, the government said.
The U.S. “has identified potential national security concerns that warrant a full investigation of the proposed transaction,” Treasury said. “Articulation of the potential national security concerns, in significant part, is classified.”
Qualcomm on Monday postponed a shareholder vote on Broadcom’s nominees for Qualcomm’s board after the Committee on Foreign Investment in the U.S., which Treasury leads, ordered a delay. Broadcom is on track to win all six of the seats it’s seeking, giving it a majority of the board to push ahead with its hostile $117 billion bid.
Treasury also cited the Defense Department’s reliance on products made by Qualcomm, which is based in San Diego. The company has “active sole source classified prime contracts” with the Pentagon, according to the letter.