It reviews proposed foreign acquisitions of USA companies and can recommend that the president block them on national security grounds.
US President Donald Trump on Monday blocked semiconductor maker Broadcom Ltd's proposed takeover of Qualcomm on grounds of national security, ending what would have been the technology industry's biggest deal ever. Donald Trump has issued a presidential order which has halted the takeover of Qualcomm for the time being.
The order effectively ends a four-month saga that saw Qualcomm, the world's fourth-largest chip company by annual revenue, targeted by a smaller company with greater momentum.
That conclusion may seem extreme given that Broadcom is based in Singapore - and looking to redomicile to the USA, where it conducts most of its operations - but it's not a fear of the Southeast Asian city state that is raising national security concerns.
"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 U.S. feared that Broadcom would curtail investment in research and development, undermining Qualcomm's position in developing 5G and creating an opportunity for China's Huawei Technologies Co. That's why the U.S. Treasury-led Committee on Foreign Investment in the United States was able to get involved.
Even as highly publicised deals such as the bid for Qualcomm by Singapore-based Broadcom, a chip maker for Apple and Chinese electronics manufacturers, run into trouble, asset purchases by Chinese buyers are still going through - and mostly out of the public eye, Wall Street deal makers said.
President Trump has issued an order blocking Broadcom's proposed takeover and anything "substantially equivalent" to it over concerns that it might "impair the national security" of the country. The letter from CFIUS accused Singapore-based Broadcom of repeatedly violating one of the panel's orders.
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"Broadcom's dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom", Qualcomm fired back in response.
The decision underlines the economic protectionism of the Trump administration and comes just days after the USA announced it would impose tariffs on steel and aluminum imports in order to protect U.S. firms. It expects to complete the investigation shortly and requested Broadcom provide any additional information as soon as possible.
Shares in Qualcomm fell 4.83 percent at 9:20 a.m.in Frankfurt.
Broadcom Chief Executive Hock Tan and other Broadcom representatives were scheduled to meet with CFIUS officials on Monday, according to the letter.
The Treasury Department also said in a letter to Broadcom, dated Sunday, that a final decision on any transaction agreed by the two companies could be made by USA president Donald Trump.
This afternoon Broadcom released a statement on the news: "Broadcom is reviewing the Order".
"We'll have to see if management change is in the offing - it looks like investor confidence in management is low", said Stacy Rasgon, an analyst at Sanford C. Bernstein.