Trump Just Blocked What Would Have Been the Largest Tech Acquisition Ever—Because China

A contentious, long-gestating bid to take over an iconic U.S. tech company has ended—and Washington’s wariness of China’s tech ambitions is only beginning.

Donald Trump issued an executive order barring Singapore-based chipmaker Broadcom from acquiring Qualcomm, the California-based semiconductor designer that dominates the market for mobile phone processors. Valued at roughly $130 billion, the deal would have been the largest in tech history had it gone through. Its swift fallout highlights how the White House is increasingly worried that China will shadow the U.S. in technology—and how Washington will take unprecedented measures to ensure its leading tech companies don’t fall behind.

In the order, issued Monday evening (March 12) in Washington, Trump states there exists “credible evidence” that Broadcom “might take action that threatens to impair the national security of the United States” should it carry forth with its acquisition of Qualcomm. Trump does not elaborate further on what that evidence consists of.

However, the U.S. Treasury Department wrote in a letter released last week that the takeover could potentially cause the United States to fall behind China in the development of 5G, the wireless technology set to power major advances in autonomous driving, the internet of things, virtual reality, and other computing trends that are now in their early stages. Specifically, the department added, Broadcom’s statements on the acquisition suggested it would manage Qualcomm using a “private equity” playbook that would reduce R&D and emphasize short-term profits. In turn, the department stated, “China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover.”

Broadcom says it “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns” and is reviewing the order. Qualcomm acknowledged the order and added that it will reconvene its annual shareholders meeting, which it put on hold upon the announcement of the CFIUS review.

Over the past few years, a number of high-profile tech acquisitions have fallen apart due to “national security” concerns from Washington and CFIUS, an inter-agency branch of the Treasury Department responsible for overseeing cross-border acquisitions. Many have roughly followed the same pattern: A Chinese acquirer and U.S.-based counterpart agree to a deal, and the two parties submit a “voluntary” filing to CFIUS for review. If the committee finds reason to block the deal, it will “recommend” against it, which typically leads to both parties dissolving it.

The Broadcom-Qualcomm deal breaks from this pattern. For one thing, the CFIUS intervention arrived before Broadcom’s acquisition of Qualcomm was finalized—in fact, many Qualcomm shareholders were rallying against the hostile bid. Meanwhile, Trump’s move marks a rare instance in which a U.S. president intervenes directly to prevent a foreign takeover of a U.S. firm. The last such case came recently, when Trump prevented Canyon Bridge Capital Partners, a U.S.-based company with opaque ties to a Chinese state-owned asset management firm, from acquiring Oregon-based Lattice Semiconductor. Before that, Barack Obama blocked a Chinese acquisition of four U.S. wind farms in 2012, and George H.W. Bush prevented the sale of a U.S.-based aerospace supplier to a Chinese government-backed company in 1990.

More broadly, the deal’s swift fallout signals how the U.S. is taking broader measures to fend off perceived “national security” threats from China. Unlike other foreign companies that have lost bids to buy U.S. counterparts, Broadcom is not Chinese, but Singaporean. Formerly known as Avago, it took its name from San Jose-based Broadcom, which it acquired in 2016. In its letter, the Treasury Department not so subtly implies that Broadcom’s acquisition will benefit Shenzhen-based tech giant Huawei, a world leader in 5G that’s largely been barred from doing business in the U.S. But it stops short of noting any direct relationship between the two companies. Huawei declined to comment on the takeover being blocked.

In November, a group of lawmakers proposed a bill that would expand the ability of CFIUS to investigate cross-border deals, which would likely slow the pace of Chinese stateside investment. Proponents of the bill might point to the close ties between China’s tech giants and the Chinese government, and argue measures are required in order to ensure that U.S. technology doesn’t end up in the hands of China’s military. Beijing, however, is likely to sum up the thwarted deal with one word: protectionism.