In a move that underscores Washington’s tilt toward increasingly protectionist measures, the US Treasury Department said in a letter Monday that Singapore-based chipmaker Broadcom’s proposed acquisition of rival Qualcomm may pose a national security risk.
“Reduction in Qualcomm’s long-term technological competitiveness and influence in standard setting would significantly impact US national security,” the letter said.
“This is in large part because a weakening of Qualcomm’s position would leave an opening for China to expand its influence on the 5G standard-setting process,” it went on. “China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover.”
The Treasury Department is one of the agencies that make up the Committee on Foreign Investment in the US (CFIUS), which ordered a national security review of the proposed deal on Sunday. The move showed an uncharacteristic sense of urgency, as reviews are usually triggered after deals have been agreed to. The uncertainty associated with such investigations, which are seen as politicized and offer little transparency, often dooms potential deals before a conclusion is reached.
CFIUS has stepped up its scrutiny of foreign takeovers of American firms in recent years, even while lawmakers in Washington weigh legislation that would increase the scope of the body’s mandate.
Shares of Qualcomm fell nearly 3% in New York trading Tuesday.