The fight between the U.S. and China to influence 5G standards is gonna be really ugly.Image: David Becker/Getty ImagesBy Raymond Wong2018-03-14 15:56:00 UTC
Broadcom is no longer pursuing plans to buy Qualcomm after Trump issued an executive order blocking the $117 billion takeover proposal over fears the deal would “impair the national security of the United States.”
“Although we are disappointed with this outcome, Broadcom will comply with the Order,” the Singapore-based company that’s currently in the process of redomiciling to the U.S., said in a press release on Wednesday.
Broadcom has been under investigation by the Committee on Foreign Investment in the United States (CFIUS) over concerns the company’s buyout of Qualcomm could stifle the chipmaker’s development of 5G technologies.
Qualcomm is currently one of the largest U.S.-based tech companies investing in research and development of 5G. Had Broadcom purchased it, CFIUS says the acquisition could have led to the U.S. falling behind and China leaping ahead in the race to influence the infrastructure that will connect everything from phones to a network of self-driving cars.
“Reduction in Qualcomm’s long-term technological competitiveness and influence in standard setting would significantly impact U.S. national security,” CFIUS warned. “This is in large part because of a weakening of Qualcomm’s position would leave an opening for China to expand its influence on the 5G standard-setting process.”
CFIUS also notes that Chinese tech companies such as Huawei have already played a key role in developing 5G, and it would be unwise to let it or other Chinese telecoms have such a firm foothold in such a crucial upcoming technology.
Of course, these concerns about national security are all mostly bogus.
“Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative security consequences for the United States.”
Of course, these concerns about national security are mostly bogus. Just as there’s no proof that Huawei phones are being used as espionage devices by the Chinese government to spy on Americans, there’s no publicly-shared evidence that supports claims that Broadcom’s now-failed buyout of Qualcomm would’ve been a risk to national security or would’ve decelerated American 5G development. Heck, Broadcom’s not even a Chinese company — it’s currently headquartered in Singapore.
Plus, Broadcom’s move to redomicile to the U.S. (which is still happening) and plans to spend $1.5 billion to train American engineers suggests it’s doubling down on American investment.
Trump’s successful move to kill the deal and CIFUS’s intervention, however, doesn’t just end Broadcom’s bid to buy Qualcomm, but could also have a lasting effect on other American companies looking for international growth.
What’s to stop Trump or the CFIUS from barring other companies from considering acquisitions from non-U.S.-based companies? The whole thing is pure protectionism and could lead to retaliation from other countries. Chinese regulators could just as easily block an American company from trying acquire a Chinese-based company over concerns for its own national security.
And it’s not just China that could give shut American businesses out. European-based companies could do the same, too. The Broadcom-Qualcomm deal is dead today, but who what could happen tomorrow and is way more worrisome.