The giant chip maker Broadcom pledged on Wednesday to keep the United States at the forefront of emerging mobile technology if it were to acquire Qualcomm, its latest effort to allay the Trump administration’s national security concerns about its hostile $117 billion takeover bid.
In a statement, Broadcom said that, were it to complete what would be the largest technology deal in history, it would not only maintain Qualcomm’s current spending on research and development but it would increase that amount. It added that it would create a $1.5 billion investment fund to train U.S. engineers.
“This will ensure America’s lead in future wireless technology,” Broadcom said.
The response came after the Committee on Foreign Investment in the United States, the government panel that reviews transactions’ national security implications, ordered a delay of Qualcomm’s shareholder meeting as Broadcom sought to win a majority of the company’s board seats.
That proactive move, all but unprecedented in the history of the panel, highlighted both how much the White House values the wireless technology known as 5G as a matter of national security and its fears of falling behind China in the race to develop the standard. The decision put a spotlight on efforts to expand the reach of the panel, known as CFIUS, as a way to bolster the White House’s nationalist economic agenda.
The Trump administration has already blocked a number of deals involving Chinese buyers, citing national security concerns. But while Broadcom is not Chinese — it is legally headquartered in Singapore and plans to relocate to the United States as soon as May — it has nonetheless incurred fears that it may erode Qualcomm’s lead in 5G.
Some lawmakers, including Sen. John Cornyn, R-Texas, have urged the Trump administration to intervene. And on Jan. 29, Qualcomm requested that CFIUS review the situation.
The panel’s intervention put Broadcom’s bid in jeopardy just as the company appeared likely to claim seats on Qualcomm’s board. Qualcomm has argued — and CFIUS appears inclined to believe — that Broadcom’s winning a majority of director seats would effectively put Qualcomm under its rival’s control.
A letter to both companies from CFIUS sent on Sunday said that the government was worried about cost cuts that Broadcom may carry out at Qualcomm. CFIUS described Broadcom’s approach to acquisitions as akin to private equity, shorthand for reducing research spending and laying off workers to bolster profitability.
But Broadcom sought in its statement on Wednesday to dispel that notion.
“Broadcom has a proven track record of managing R&D for maximum impact and investing in core franchises,” the company said.
CFIUS’ letter also referred vaguely to worries about Broadcom’s relationships with “third party foreign entities.” In its statement, Broadcom argued that it was American in every way but legally, highlighting that businesses it has acquired descended from companies like Hewlett-Packard and AT&T.
