M &A security

Digital protectionism and national security

Qualcomm is no ordinary company. In an era when mobile technology is ingrained in every kind of economic activity, it develops key intellectual property underlying wireless communication. All mobile networks are built on standards developed with Qualcomm’s leadership. In a sense, Qualcomm’s technology touches all the data on all mobile devices, everywhere. Most people may not know it, but the company is as ubiquitous as the air. Given this, it is no surprise that the acquisition of the San Diego-based Qualcomm by Singapore’s Broadcom raised questions of national security. The $130bn hostile bid landed late last year. The committee on Foreign Investment in the United States (Cfius), an intra-agency panel that reviews foreign acquisitions, took an interest soon thereafter. Early this month Cfius stated its initial conclusions. Cfius’ primary worry was that Broadcom would cut back long-term investment at Qualcomm, especially in the 5G wireless standard (this conclusion was based on both Broadcom’s past behaviour and the heavy debt it would take on to close the deal — which could force it to focus on short-term profit). This might allow China’s Huawei, which is investing heavily in 5G, to attain a dominant position in the technology. Second, Cfius noted that Qualcomm has contracts with the Department of Defense — some of them classified.