Why a Qualcomm takeover could have grave consequences
March 1, 2018
By Rep. Scott Peters
San Diegans celebrate our partnership in the national defense. We’re a home port for Navy vessels and a center of Marine Corps recruiting and training. We’re an officially designated Coast Guard City. We’re home to shipyards for construction and repair, companies that specialize in unmanned vehicle technology, and a center of cybersecurity excellence.
We all know Qualcomm as the inventor of early wireless technology, the company that put the “smart” in smartphone. We know Qualcomm provides high-quality jobs for the region, with an annual economic impact of over $4 billion. The company and its founders, the Jacobs and Viterbi families, are cornerstones of our civic and philanthropic community.
Less known is Qualcomm’s role in our national defense; its research into next generation wireless technology — 5G — is critical to national security. Whether it’s NASA communicating with space satellites, Navy ships communicating with submarines miles undersea, Marine commanders communicating with troops across the battlefield, or energy purveyors communicating with a grid, the integrity of those communications depends on the innovation and brainpower at Qualcomm. Its continued development of 5G wireless, artificial intelligence and other technologies that will underpin nearly every internet-connected device in the country, also makes Qualcomm a target for foreign intelligence agencies.
5G research in the United States is centered at Qualcomm and we have an interest in nurturing and protecting this technology by keeping it onshore. The Department of Defense, for example, insists on keeping shipbuilding onshore; we never want to rely on potential adversaries to build or repair our naval force. The same is true for American wireless technology. There is a real and imminent danger in turning it over to a Chinese company when we know China has endeavored to steal intellectual property secrets from American companies, is likely trying to steal our military intelligence, and is aggressively closing the technology gap.
Qualcomm is the global leader in development of 5G networks. What’s not being done by Qualcomm is being done in Korea and China. 5G will allow for revolutionary inter-connectedness of devices in nearly every economic sector, tying our education system, vehicles, homes and personal devices to the internet. Allowing the Chinese to leapfrog the United States in 5G development through Broadcom’s acquisition of Qualcomm would have serious national security implications.
That’s why I wrote to Treasury Secretary Steve Mnuchin requesting a classified report to Congress via the Senate and House intelligence committees. I also asked for an immediate review of any potential transaction by the Committee on Foreign Investment in the United States, or CFIUS, within the Department of Treasury.
CFIUS is the federal agency tasked with reviewing mergers and acquisitions of U.S. companies by foreign-controlled entities under the authority of the Defense Production Act of 1950. The act requires CIFIUS review transactions for potential effects on “critical infrastructure” and “critical technologies.” It authorizes the executive branch to block transactions for national security reasons. Given that Qualcomm’s 5G meets these requirements, I believe strongly that a CFIUS review is warranted.
A 2012 House intelligence committee report noted the threat Chinese telecommunications companies pose to our national security. It declared that “the United States should view with suspicion the continued penetration of the U.S. telecommunications market by Chinese telecommunications companies” because of “their potential ties to the Chinese government or military.” The concern was that Chinese companies could activate cameras and microphones in smartphones and televisions without user knowledge and the possibility that information gathered could be shared with the Chinese government.
Penetration of Qualcomm’s board of directors by the Chinese poses a similar threat and should be subject to review regardless of whether Broadcom’s takeover bid is successful. And with a board of directors election scheduled for Tuesday, time is of the essence.
I’ve contacted congressional intelligence committees and California’s two senators to enlist their help. And I’m heartened by support from both Rep. Duncan Hunter, R-Alpine, and Sen. John Cornyn, R-Texas.
I understand Qualcomm’s directors have an obligation to their shareholders. As a San Diegan, I hope shareholders will see the financial wisdom of keeping Qualcomm a long-term innovation company, rather than seeking short-term profits from short-sighted corporate raider tactics. As a member of Congress, I also have a duty to make sure a private hostile takeover does not erode our nation’s ability to maintain our defenses in an environment that’s more dependent on technology than ever. Ceding America’s leadership in telecommunications technology to China could have grave consequences for the entire nation.
Peters, D-San Diego, represents the 52nd Congressional District.