Singapore Noodles and Chinese Takeout: Trump Stops Threat to American 5G Tech Dominance
Score one for President Trump for not repeating the dangerous mistakes made by Bill Clinton twenty years ago.
You may remember the name Johnny Chung from the 1990s. He was the shady owner of a business that blasted marketing spam at fax machines before we knew what spam was. He also funneled hundreds of thousands of dollars to the Democratic National Committee -- some of which, he later admitted, was given to him by Chinese intelligence services.
Coincidentally, or not coincidentally, the Clinton administration thereafter got busy approving all manner of advanced rocket technology transfers to China.
Now, decades later, advanced Chinese rocket technology threatens American military power in the Pacific and also enables Chinese nuclear missiles aimed at the United States. China greeted President Trump's 2017 visit to China with tests of one missile model, the DF-41, aptly named the “Eastwind,” and its ten nuclear warheads just days before Trump arrived.
Now, it seems history could repeat itself with a new transfer of advanced telecom technology, this time through a corporate takeover rather than a shady financier to the DNC.
This corporate power struggle that has been unfolding over the last few months has major implications for our national security and American leadership in wireless technology. In an important move, the Trump administration, through the Treasury Department, has now stepped in to protect American security interests.
The American technology innovator Qualcomm is facing a hostile takeover by the Singapore-based Broadcom -- a firm with a reputation as a corporate chop-shop, selling off the pieces of companies to the highest bidder. In their effort to take over Qualcomm, they were running a slate of candidates to take over a majority of the board.
Qualcomm is the leading innovator of 5G cellular technology -- a critical new infrastructure that will enable nations that use it to engage in advanced technological processes that 4G does not allow.
This fire-sale threat at Qualcomm and the potential setback to 5G technology development -- and, most importantly, the exposure of U.S. national security assets -- prompted a number of leading elected officials and experts on national security to write to Treasury Secretary Steve Mnuchin. These requests asked for the Committee on Foreign Investment in the United States (CFIUS) to review the potential transaction ahead of the shareholder meeting.
CFIUS is an inter-agency committee authorized to review transactions that could result in control of an American business by foreign interests. It does so to determine the effect of such transactions on the national security of the United States.
Sen. John Cornyn, Sen. Tom Cotton, and a group of five House Republicans -- among others -- urged CFIUS to act quickly. They were joined by experts from the Heritage Foundation and the American Enterprise Institute.
This hostile takeover is a major concern because Broadcom is a foreign company, despite its claim to be moving its headquarters back to the United States in the future, someday, yet to be determined.
Sen. Cotton said: “It’s alarming that one of our most important telecom companies could fall under foreign control -- and in a hostile takeover no less.”
Even more concerning is the national security implications for destroying America's leadership in the race for 5G. Qualcomm is the American company capable of maintaining American leadership in the development of 5G, and ensuring America's leadership in setting global standards.
As Cornyn pointed out: “The United States is currently in a race with China in the development of 5G technologies, a race that will have profound impact on critical United States telecommunications infrastructure and U.S. national security for decades to come. ... Qualcomm is the only U.S. company that is currently capable of leading 5G development.”
Cornyn added that if the takeover is successful, the likely result is that China’s Huawei will win the race for 5G. Broadcom, given its history, is likely to break up Qualcomm and sell parts of the company to the highest bidder. The result could put these assets in foreign hands and would most certainly prevent the company from maintaining U.S. leadership in 5G technology.
The stakes are much too high for such a deal to go through, especially without a thorough review by CFIUS. U.S. leadership in 5G is simply too important to our security and economic interests. As a number of the elected officials said, it would set an especially troubling precedent to allow companies to evade CFIUS review through attempts to takeover boards in proxy fights.
Fortunately, the Trump administration took the threat seriously -- and acted.
Ahead of the March 6 board meeting, CFIUS asked Qualcomm to delay the meeting so that it could undertake a comprehensive review.
In a letter released today, the Treasury Department stated the deal “could pose a risk to the national security of the United States.” It added that the “weakening of Qualcomm’s position would leave an opening for China to expand its influence on the 5G standard setting process." And, considering “well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have negative security consequences for the United States.”
It’s hard to overstate the stakes of such a takeover. This is exactly the situation CFIUS was created to address.
The Trump administration, including its officials at Treasury, did the right thing and should be commended for their actions to defend the U.S. economy and security. The contrast between Trump and how two of his predecessors viewed American global dominance couldn’t be more clear.