Business In Society
Facebook Twitter LinkedIn

Business in Society Blog

Biggest takeover in tech industry history blocked for U.S. “national security”

First, it was steel and aluminum. (“If you don’t have steel, you don’t have a country.”)

Now it’s chips. 

This week, the Trump administration blocked a Singapore-based company’s $117 billion offer to gain control of Qualcomm, the U.S. producer of sophisticated semiconductors. That’s significant on two counts.

First, it indicates the strategic importance of current and anticipated  superconductors. These Qualcomm products power the many diverse smartphones and tablets now in use and may well guide emerging artificial intelligence applications before long. Steel is surely important to society but, increasingly, so is software.

Second, national security is now being invoked as a basis for protectionism as rarely before, according to a New York Times report, “Trump’s Killing of Chip Deal Pushes Protectionism as it Invokes Security”  :

“The Trump administration, in ways that are largely unprecedented in modern history, has begun wielding national security as a club, using it to strike other nations with protectionist measures like tariffs, visa restrictions and curbs on foreign investment. That approach is expected to escalate in the coming weeks as the White House prepares to hit China with tariffs of billions of dollars for the alleged theft of American intellectual property.” 

The Qualcomm suitor, Singapore company Broadcom, has many joint ventures in China, giving rise to concern that China could influence Qualcomm strategic decisions inimical to U.S. interests.

Experts’ disagreement on the administration’s action indicate how tough a call it is to invoke national security on international business transactions. From the Times report:

“Daniel H. Rosen, at the research firm Rhodium Group, said the attempted takeover hit ‘right at the core of concerns about how national security concerns are going to evolve tomorrow. I think any foreign acquirer would have given rise to very serious and difficult-to-answer questions. In this case, the president is being driven by the arc of history, rather than the other way around.'”

“Jason Furman, a top economic adviser to President Barack Obama ‘warned … making broad assertions about national security … such protectionist behavior could stunt global investment. If every country conducted policy like that, it would make cross-border investment difficult to the detriment of American and foreign countries. Foreign investment is an important part of the  U.S. economy.'”

Nevertheless, one aspect of the policy is clear. The soundness of the U.S. economy — and global trade — is increasingly being linked to the country’s national security.