Qualcomm v. Broadcom: A National Security Issue

Late last month, I wrote about the draft proposal from the Trump administration to nationalize the American 5G network as a way of protecting it against foreign influence. Though I was skeptical of the methods chosen, I was more appreciative of the assessment of the problem:

... it is worth acknowledging that the National Security Council proposal is on to something. The prevalence of Huawei technology globally is a real security threat to U.S. interests—of that, there can be no doubt. From the outside, it looks to me like the CFIUS process has managed this threat behind the scenes (for example, by keeping Huawei from buying a stake in some U.S. companies).

We are about to find out whether or not the Committee on Foreign Investment in the United States (CFIUS) process is up to the task.

In the 5G world there really are two players—Huawei and Qualcomm. At a board meeting scheduled for March 6, a Singaporean company, Broadcom, will attempt a hostile takeover of Qualcomm. The six nominated hostile directors are all being paid by Broadcom and have signed non-disclosure agreements with Broadcom that, among other things, appear to prevent them from disclosing their future plans for Qualcomm should they win the election.

Some of what they might do (and, of course nobody knows for sure) could have significant impacts on American national security. If Broadcom wins on March 6, the new board could, for examle, fire Qualcomm management; cut research-and-development spending on 5G; or stop Qualcomm from participating in the 5G standards setting process. Perhaps more to the point, Qualcomm is an essential contracting partner of the U.S. government, holding a top secret facility security clearance. If purchased by a foreign company that status might be in jeopardy.

Nobody knows for sure, but there is a suspiscion going around that Broadcom's ultimate goal is to help Huawei and that this play is an attempt to squelch American 5G development. The question then is whether or not CFIUS considers this potential hostile takeover to be worthy of its attention. Thus far it has not—which seems to call into question my earlier confidence that the process is adequate.

I don't know the answers to these questions. Perhaps my concerns are overblown. But I do hope that CFIUS asks on our behalf.