Published: Thu, March 08, 2018
World News | By Laverne Osborne

Broadcom Pledges 5G Investment to Win Qualcomm Deal Approval

Broadcom Pledges 5G Investment to Win Qualcomm Deal Approval

The letter was only made public by Qualcomm on Tuesday 6 March and is a rarity as the CFIUS rarely weighs in on deals it is examining.

Mir also cited concerns about Broadcom's relationships with foreign entities, without elaborating on who they might be.

The Treasury Department laid out its concerns in a letter to both chipmakers explaining its Sunday order to delay Qualcomm's annual shareholder meeting.

The proposed takeover of Qualcomm by Broadcom could be the largest ever tech acquisition in history if it is given the go-ahead. The CFIUS letter noted that Broadcom has not elaborated on how it plans to change Qualcomm's licensing model, but appeared to side with Qualcomm's claim that its current model is needed to support R&D funding.

Broadcom has pledged to move its headquarters from Singapore to the USA, possibly as soon as May.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees", Broadcom said in a statement. Much of the company's troubles stem from its patent licensing business, which has been in the cross-hairs of competition regulators and is at the center of an ongoing fierce legal battle with Apple over patent fees.

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"Broadcom will not only maintain the R&D resources Qualcomm devotes to 5G and innovation in future wireless standards - we will also focus R&D spend to those critical technologies that are essential to the U.S".

As expected, Broadcom didn't take the news lying down. The debt Broadcom would need to finance the deal would increase pressure to earn short-term profits at the expense of spending on research and development, according to the letter.

Broadcom said it's cooperating with the review by CFIUS.

Qualcomm also is a product supplier to the USA government and is working with it on cybersecurity for the next generation of wireless, 5G and the Internet of Things, according to the letter. "Limitation or cessation of supply of Qualcomm products or services to the USA government could have a detrimental impact on national security".

Broadcom, which makes chips for everything from set-top boxes to data centers, on Wednesday vowed to make the USA a global leader in 5G, a next-generation cellular technology that's poised to boost wireless speeds, coverage and the ability to handle an ever more diverse deployment of connected devices.

Shares of Qualcomm fell almost 3% in NY trading Tuesday.

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