Broadcom's ongoing attempt to acquire Qualcomm, a deal that would be the largest tech merger in history, hit another roadblock this week when the U.S. government chose to intervene.

The investigation by CFIUS, which considers national security risks to foreign acquisitions of USA companies, came after Qualcomm filed a notice with the panel seeking a review.


More specifically, he cited Broadcom statements indicating it may focus more on short-term profitability after any acquisition, possibly leading to a reduction in research and development spending.

The response came after the Committee on Foreign Investment in the United States, the government panel known as Cfius that reviews the national security implications of transactions, ordered a delay of Qualcomm's shareholder meeting as Broadcom sought to win a majority of the company's board seats. "Entrusting this effort to a failing Qualcomm management who lack the support of its owners, and that pays out much of its excess cash flow in fines as a result of serial lawbreaking, would not be in America's long-term interests".

Assuming its aim was to scupper Broadcom's hostile takeover, the Qualcomm board seems to have played a blinder in getting the CFIUS involved.

"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 said in a statement that it is cooperating with CFIUS and is committed to making the combined company a global leader in 5G and other technologies. Broadcom shareholders are expected to vote on the move in early May.


On Wednesday, Broadcom tried to assure regulators that it is emphasizing investments in research and development.

Some on Wall Street and in government have been vociferously against the proposal, partly because of the idea that Broadcom might cut Qualcomm jobs, but also because of the importance of the companies' products-chips for telecommunications equipment-in the upcoming wave of "5G" mobile broadband technology.

An investigation by the CFIUS into a deal that has been proposed, but not yet completed, is highly unusual, and underscores the US' concerns about maintaining its dominance in semiconductors in the face of advances by China. Broadcom's shares were up slightly at $247.90.


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