Tuesday, 13 March 2018

Singapore is a threat to the national security of the US

Prime Minister Lee Hsien Loong should go on TV and broadcast to his countrymen that Singapore has "arrived". The mighty US is scared of little Singapore. Perhaps a national holiday in Singapore will be declared to mark the event !

I am referring to the US government blocking the bid by Broadcom for the takeover of Qualcomm, on the grounds of national security. Broadcom is a Singaporean company (never mind that Broadcom had offered to move its headquarters to San Jose if the deal went through). Qualcomm is an American company. So Singapore is a threat to the national security of the US. Great !

The US government is giving a specious argument to justify national security. According to the government, Broadcom would cut R&D spending after it took Qualcomm over.  This would affect the development of 5G technology. Instead Huawei would become the leader in 5G. Huawei is a Chinese company. Therefore the US would be dependent on China for its mobile networks. That is the threat to national security.

That is an even more laughable argument. Qualcomm is an important player, but not the leader in the development of 5G in the first place. Have you forgotten Cisco ? Intel ? AT&T ? Samsung ? Ericsson ? And innovation is not the monopoly of anybody - even a rudimentary understanding of business should tell you that. Innovation comes from the strangest of places. If Qualcomm slashes R&D, does anybody seriously think other US companies will not succeed in 5G. If the US was solely dependant on Qualcomm, it was screwed long ago.

And why is 5G technology a matter for national security ? If this is truly the case with wireless technology, China's national security has long been compromised  because of US leadership thus far. Why is ownership of 5G technology and standards so  worrying ? Is the argument that Huawei will get a monopoly of technology and therefore all US companies will have to buy telecommunication equipment only from them and therefore China will have a backdoor entry and control over the entire US telecommunications infrastructure ? That stretches incredulity to the limit.

There's an interesting subplot to this. In the midst of the drama with Broadcom, Qualcomm  itself  is currently trying to take over NXP - another semiconductor company. That deal is awaiting clearance from Chinese regulators. Fat chance of that happening now. The people really screwed by these developments are Qualcomm shareholders - they don't get NXP and they don't get to be bought out by Broadcom at a stiff premium. And before you say you don't care about shareholders, let's just note for the record that US institutional investors , including mutual funds and pension funds, hold nearly 80% of Qualcomm stock.

No, this is not about national security at all. These days it appears you can claim national security for anything - even steel and aluminium tariffs. This is pure and simple economic nationalism. We don't want an American company to be taken over by "Chinese looking people". That's it.

The current US administration is supposed to be a Republican one.  Standing for free trade and non interference of government into business. Has ideology, beliefs and policy ceased to matter at all ?


Anne in Salem said...

I assume that last question is rhetorical. Perhaps you would understand if you stopped thinking logically. Clearly the decision-maker is not thinking logically.

Great ideas come from everywhere, and many times the same idea incubates in multiple places at once. How many companies have raced to complete a project so they are the ones to get the all-important patent? I agree that a cut in R&D spending by one American company will likely spur other American companies to work harder and faster, that said cut will not give China a monopoly on good ideas or even on 5G research.

A clarifying question - Wouldn't economic nationalism oppose any outsider, whether Asian, African or European, from controlling US companies? Wouldn't an aversion to "Chinese looking people" taking over American companies be racism rather than economic nationalism?

It doesn't look like we'll get much more information on this blocked merger since Tillerson's pink slip has overtaken the news media.

gils said...

so the Tillerson announcement makes sense now. offlate American way of governance is pretty similar to what happens here. Throw them off the scent by creating a scene elsewhere. public memory is short everywhere it seems.
was wondering when you would be posting on this topic. paatha already posted :D

Ramesh said...

@Anne - I responded before, but it seems to have vanished. As always, you have summarised perfectly. American companies and innovation is far more than any single company.

@Gilsu - I don't think it was a smokescreen. They don't seem to care about anything of the chaos they create. It is truly a train wreck.

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