The federal government said Broadcom's proposed acquisition of rival chipmaker Qualcomm could pose a national security risk and called for a full investigation into the hostile bid.
The government action on Sunday highlighted growing USA concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.
The CFIUS is comprised of officials from multiple cabinet agencies and is tasked with investigating potential national security threats from foreign business deals in the U.S.
Reuters says the USA asked Qualcomm to postpone a shareholder meeting so it can scrutinize Broadcom's bid for the chipmaker.
Qualcomm's 5G chips are used by the Pentagon, and if it loses its competitive standing under the Broadcom umbrella, it could leave China's Huawei as the dominant chipmaker, Reuters reported, citing a source familiar with CIFIUS' thinking.
A source said if the deal was completed, the USA military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that is essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment)".
In early November, Broadcom CEO Hock Tan met with President Trump to announce that the company's headquarters will move from Singapore to the USA, a process that Broadcom later said could be complete by May 6.
It seems the US government is concerned over the possibility that Chinese companies can obtain the 5G technology of the U.S.as a result of Broadcom's acquisition of Qualcomm.
The move complicates an already contentious deal and increases the likelihood that Broadcom, which is based in Singapore, will end its pursuit of Qualcomm.
Instead, Broadcom has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm's 11-member board.
The review of the Broadcom deal illustrates the United States government's expanding focus on the competitiveness of the national semiconductor industry as China advances, regulatory experts said.
Broadcom still is moving ahead, and the company believes it can work things out with the CFIUS in time for Qualcomm stockholders to vote for a new Board run by Broadcom. Broadcom just has to wait, move back to the USA, and that will be one obstacle it does not have to worry about.
"This can only be seen as an intentional lack of disclosure - both to Broadcom and to its own stockholders", Broadcom said.
It also criticised Qualcomm for not mentioning that it had done this, especially in the two meetings between the companies on 14 February and 23 February, which it said was an "intentional lack of disclosure". The company points out that its CEO is an American, it's in the process of moving its headquarters to the USA, and it and Qualcomm have institutional shareholders in common.
CFIUS, an interagency regulator led by the Treasury Department, has launched an investigation into the proposed acquisition. Talks grew more contentious a few weeks later when Broadcom lowered its buyout offer for Qualcomm to approximately $117 billion, making "an inadequate offer even worse".