In a rare intervention by the government, the Trump administration moved on Sunday night to stall the potential takeover of Qualcomm, the leading USA chipmaker, by Singapore-based Broadcom on national security grounds.
"Qualcomm has become well-known to, and trusted by, the US government", the Treasury Department wrote to lawyers involved in the deal on Monday.
The US government's Committee on Foreign Investment in the United States (CFIUS) ordered a national security review of Broadcom's proposed deal on Sunday in an unusual move that prompted Qualcomm to delay a shareholder meeting yesterday.
Today, Qualcomm stockholders were supposed to vote on the make up of the company's Board of Directors.
Qualcomm's sale to Singapore-based Broadcom could hurt the chipmaker's competitiveness by reducing research and development, which would threaten US security, Treasury said in a March 5 letter released by Qualcomm Tuesday.
The review of the Broadcom deal illustrates the U.S. government's expanding focus on the competitiveness of the national semiconductor industry as China advances, regulatory experts said.
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The Treasury Department's concern is both over national security issues and a fear China would be able to gain a strategic advantage in future 5G networks development.
"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 reads.
Huawei has been forging closer commercial ties with big telecom operators across Europe and Asia, putting the company in prime position to lead the global race for 5G networks despite United States concerns. San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies vying for market share in the sector, such as Huawei Technologies Co., making Qualcomm a prized asset.
In January, Chinese firm Ant Financial canceled its bid to acquire US money transfer company MoneyGram, after CFIUS rejected the deal, citing concerns over the safety of data that can be used to identify USA citizens.
"Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company - and in a hostile takeover no less", Cotton said in a statement Monday. Broadcom is based in Singapore.
Broadcom did not immediately return The Daily Caller News Foundation's request for comment.