The Corner

National Security & Defense

National Security and the Fight over Qualcomm

Qualcomm’s booth at the 2016 Mobile World Congress in Barcelona, Spain. (Albert Gea/Reuters)

Business transactions are normally out of my lane, but a fight currently occurring in the business world has some big national-security implications.

As interested investors know, Broadcom, a Singapore company, is fighting to take over Qualcomm. Broadcom made a takeover bid — which the company rejected — and is now engaged in a proxy fight to replace the board of directors of Qualcomm. That vote will occur on March 6.

Again, this would normally be a business issue fought according to the terms of the free market. But the monkey wrench here is the emerging 5G network in which Qualcomm has invested so greatly. The implications of 5G aren’t entirely clear even to experts in the field, but one thing seems certain: As it emerges, it will be the key to the Internet of Things, which will revolutionize not just the commercial and consumer sectors but also support critical military and public-safety infrastructure.

The Chinese understand this all too well. Their military doctrine is explicit that the wars of the future will be fought primarily in the information domain. They largely missed out on the development of the 4G network, and they are determined to control 5G. To that end, they heavily subsidize research on 5G in their own country, and especially through their national champion, Huawei. Notwithstanding that, the United States is currently ahead in the development of 5G because of robust investment by its enormously innovative private sector. Qualcomm is the recognized leader in that.

It would not be much of an oversimplification to say that the contest to develop 5G, and control the information domain, is shaping up as a race between Huawei and Qualcomm.

So control of Qualcomm has implications far beyond the return to its investors. I’m not saying that Broadcom will work for Chinese interests, but they may have very different business plans than the current management. Qualcomm has, to this point, taken the long view, which is why it is so committed to developing 5G. But as Derek Scissors of AEI has pointed out, Broadcom might — quite logically from a business standpoint — focus on cutting costs (including research) and making higher short-term profits in less-challenging sectors such as consumer electronics. New firms might enter the research field to replace Qualcomm, but they would start from behind and would face entrenched Chinese firms, supported by the Chinese government, in the effort to catch up.

There is a way of making sure that doesn’t happen. The Committee on Foreign Investment in the United States (CFIUS) has jurisdiction over foreign acquisitions with national-security implications. It can decide to review this corporate fight and either prevent the Broadcom takeover or condition any change in business ownership or management on Broadcom agreeing to sustain the research that is vital to American national security. In other words, there may be a way to let this struggle for control take place without threatening the huge non-economic interests at stake, but we can’t know that unless CFIUS agrees to take the case.

There is a strong movement in Congress to strengthen CFIUS review in general. The current Broadcom-Qualcomm fight exemplifies the reason Congress is so worried; in fact, I would be surprised if there is not an increasing expression of congressional concern over the fate of Qualcomm as the proxy vote approaches.

The Trump administration’s national military strategy states that “inter-state competition, not terrorism, is now the primary concern in U.S. national security.” That is exactly right. America is in a national competition, especially with China. I have great confidence in the enormous reservoirs of American strength, but the challenge is real, and we can’t afford to give advantages away if we want to win.

Jim Talent, as a former U.S. senator from Missouri, chaired the Seapower Subcommittee. He is currently the chairman of the National Leadership Council at the Reagan Institute.


The Latest