In a presidential order on Monday, Trump claimed that "credible evidence" had led him to believe that if Broadcom were to acquire control of Qualcomm, it "might take action that threatens to impair the national security of the United States".
The cancellation has deep ramifications for the entire tech sector, especially since the Administration's reason for it was fear of China taking vital US technology from a Singapore company.
The decision comes after Trump on Thursday signed off on import tariffs on steel and aluminum.
Nothing's for certain. Along with ZTE, Huawei began ploughing billions of dollars into the field from 2009 and is now among China's top filers of patents both internationally and domestically, covering everything from data transmission to network security. Broadcom will be shifting its headquarters to the United States, and from there it will be deciding its next move. Broadcom said it strongly disagreed that its proposed takeover gave any cause for concern.
Broadcom is, in parallel, in the process of establishing itself in San Diego precisely to avoid concerns about national security.
It has been seen by United States competition lawyers as an abuse of the committee's powers.
Cowen & Co. expects Broadcom's earnings, slated for March 15, to serve as the next potential catalyst for the company as Chief Executive Officer Hock Tan establishes a "clear strategic direction" for the chipmaker, as reported by Bloomberg.
The company also noted that it was hit with a $1.2 billion charge after the European Union ruled it had conspired with Apple to shut out competitors from the market for smartphone chips.
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He didn't elaborate, but last week the Committee on Foreign Investment in the United States (CFIUS) warned that a deal, if successful, could lead to China becoming dominant in the development of 5G, which "would have substantial negative security consequences for the United States".
The committee, which operates under the auspices of the Treasury Department, is tasked with reviewing foreign acquisitions of US companies on national security grounds. The merger would have put one of America's largest mobile chipmakers in the hands of a company based in Asia, a region that has been racing against American companies to develop the next generation of mobile technology.
Broadcom's business model relies on raising the company's profitability and value through acquisitions, which in turn limits resources for research and development, the letter added.
Companies like Huawei, Qualcomm, and Samsung are key players for popularising the 5G communications standards. Qualcomm's commitment to R&D into the technology is virtually unparalleled in the industry, except perhaps by Huawei.
Mnuchin added that it "is not meant to make any other statement about Broadcom or its employees, including its thousands of hardworking and highly skilled USA employees". That could allow Chinese companies, namely Huawei Technologies Co, to become the dominant supplier, the USA said.
According to Dealogic, the number of failed acquisitions by Chinese companies reached a record 68 in 2017, up from 65 in 2016.
"Qualcomm has become well-known to, and trusted by, the U.S. government", said the CFIUS earlier this month. Last September, he blocked the sale of Hillsboro, Ore. -based Lattice Semiconductor (LSCC) to Canyon Bridge Capital Partners, which has ties to a fund owned by the Chinese government.