U.S. President Donald Trump has issued an order prohibiting semiconductor maker Broadcomd's proposed takeover of Qualcomm on grounds of national security, bringing an end to what would have been the technology industry's biggest deal ever.
Qualcomm had rebuffed Broadcom's US$117 billion takeover bid, which was under investigation by the U.S. Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the U.S. Treasury Department that reviews the national security implications of acquisitions of U.S. corporations by foreign companies.
"The proposed takeover of Qualcomm by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited," the presidential order released on Monday said.
The order issued by the White House cited "credible evidence" that led Trump to believe that Broadcom taking control of Qualcomm "might take action that threatens to impair the national security of the United States."
This is the fifth time ever a U.S. President has blocked a deal based on CFIUS objections and the second deal Trump has stopped since assuming office.
Trump's move accelerated a decision that appeared likely after CFIUS told Broadcom in a letter on Sunday that its investigation "so far confirmed the national security concerns."
The U.S. Treasury Department letter was "obviously a poison pill," Jim Lewis, a CFIUS expert at the Center for Strategic and International Studies, said before the Trump order. He described the CFIUS communication to Broadcom as "unprecedented."
The semiconductor industry is racing to develop chips that power so-called 5G wireless technology, allowing the transmission of data at faster speeds.
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 it a prized asset.
A source familiar with CFIUS' thinking had said that if the deal was completed, the U.S. military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment)."
Broadcom had struggled to complete its proposed deal to buy Qualcomm which had cited several concerns including the price offered and potential antitrust hurdles.
(Reporting by Diane Bartz and Chris Sanders in Washington; Supantha Mukherjee and Pushkala Aripaka in Bengaluru; Greg Roumeliotis in New York; Editing by Peter Henderson)