Broadcom Security Probe Intensifies Trump Stand on China Deals

The U.S. move to suspend Broadcom Ltd.’s hostile takeover of rival Qualcomm Inc. is the most high-profile proof yet of the Trump administration’s national security concerns about foreign purchases of American technology firms, Bloomberg informs.

Several proposed takeovers by overseas investors have fallen apart over the last year after failing to resolve the concerns. Washington has long been wary of acquisitions of sensitive technology, particularly by Chinese buyers, but scrutiny has intensified under President Donald Trump, according to lawyers who work on such deals.

Since Trump took office last year, at least half a dozen foreign acquisitions of American technology firms have been scuttled in the face of national security concerns raised by the Committee on Foreign Investment in the U.S., or CFIUS, which reviews overseas takeovers. The pile-up of deals reflects scrutiny of technology acquisitions going back to the Obama administration, which warned before it left office that China’s push to develop its domestic semiconductor technology posed a risk to U.S. security.

CFIUS, led by Treasury Secretary Steven Mnuchin, has become more demanding under Trump, according to Brian Fleming, a lawyer at Miller & Chevalier Chartered in Washington, who previously worked in the Justice Department’s national security division.

“The risk tolerance has been lowered significantly in the current administration,” Fleming said. “Whereas it may have been the case in the previous administration that certain risks could be tolerated and perhaps addressed through mitigation those risks are not as well tolerated any more, and it is a higher bar you have to clear.”

What’s unique about the Qualcomm review is that the government is stepping in before there’s a formal sale agreement. Qualcomm on Monday postponed a shareholder vote on Broadcom’s nominees for Qualcomm’s board after CFIUS 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.

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