WASHINGTON • A possible merger of two giant makers of computer chips could revolutionise the all-important industry - which touches everything from smartphones to cars - and shift the balance of power from California to Asia.
Washington is not so sure that is a good idea.
In a rare intervention by the government, the Trump administration moved on Sunday night to stall the potential takeover of Qualcomm, the leading US chipmaker, by Singapore-based Broadcom on national security grounds. The action, by a little-known and secretive government panel, represents a newly aggressive posture by the administration to protect national corporate champions and scrutinise acquisitions by overseas companies.
The explanation came yesterday. The panel has identified potential risks that warrant a full probe, a senior US Treasury official said in a letter to the companies on Monday.
Some of the concerns relate to risks associated with Broadcom's relationships with foreign entities, the Treasury's deputy assistant secretary for investment security Aimen Mir said in the letter. The letter, dated March 5, was made public by Qualcomm yesterday.
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.
The letter said that, as with every investigation, the review will look at the potential risk of an unnamed "actor" working through Broadcom to hurt US national security, adding that the bulk of CFIUS' concerns were classified.
The inter-agency body, led by the Treasury, rarely looks at mergers before firms have clinched an agreement, highlighting the urgency of US concerns about safeguarding semiconductor technology and casting doubt on the deal's success.
The US government is concerned that Chinese companies, including big network equipment and mobile-phone maker Huawei Technologies, will take advantage of any openings to take the lead in the next-generation mobile-phone networks known as 5G.
"A shift to Chinese dominance in 5G would have substantial negative security consequences for the United States," the letter said.