Hunter: Broadcom’s Takeover of Qualcomm Is Disaster for National Security and for San Diego

Mar 5, 2018 Issues: National Security

Qualcomm’s acquisition by Broadcom Ltd. at any price would damage American security and endanger the creative team of San Diegans who have made this company a technology jewel for the U.S.

During WWII, it would have been unthinkable to allow foreign acquisition of America’s steel industry.  In today’s precarious security environment where adversaries like China are actively stealing technology and intellectual property, the high-speed communications industry is equally as important.

If Broadcom acquires Qualcomm, the hostile takeover would make Broadcom the third largest chipmaker in the world, giving them control over a major portion of the supply chain, which is critical to the vital communications components such as Wi-Fi and cellular modem chips. Such a company, if subjected to national or terrorist interests adverse to America, could install lockout features to block our security agencies from monitoring mobile data.  The possibilities for damaging U.S. security are limitless.

Broadcom, a Singapore-based company, has increasing ties with China.  This should concern us as a nation. These ties were most recently reflected in the agreements Broadcom signed with HBC, Inspur and StarTimes.   China has a finely honed capability to access the technology of companies such as Broadcom, along with that of their subsidiaries and acquisitions.

The takeover would also endanger the thousands of San Diego residents who comprise Qualcomm’s local employee base.  In the past, Broadcom has demonstrated a tendency toward initiating layoffs during mergers.  If these jobs are sent offshore, our nation not only loses a critical intellectual asset, but San Diego’s job market will take a direct and significant hit.  According to Tyler Lowery, formerly with Fortune 500 company Micron Technology, the loss of these thousands of jobs at Qualcomm puts thousands more at risk due to the significant business partnerships and collaborations that have made Qualcomm so successful.

Bringing jobs back to the U.S. is a high priority for President Trump.  I agree and support him on this effort.  This action, however, does the opposite of this important goal.  A takeover of Qualcomm by Broadcom would very likely cost jobs in San Diego, not create or protect them.

For these reasons, I wrote President Trump last week asking him to block the sale and takeover pending a national security review.  He has the authority to do this under the Defense Production Act of 1950, as modified by the Exon-Florio provisions of 1988.  The advisory board that reviews foreign takeovers of American companies is the Committee on Foreign Investment in the United States (CFIUS), chaired by the Secretary of the Treasury Steven Mnuchin.  Secretary of Defense Jim Mattis is a key member as well. 

The test for the deal’s approval is simple.  Does this action damage U.S. security?  As a member of the House Armed Services Committee, my view is a resounding yes.  Not only would it damage U.S. security, it would do so severely.  Since my initial letter to President Trump, news services have reported that the administration has initiated a review of the deal on national security grounds.  Additionally, this week U.S. Senator John Cornyn of Texas has joined in seeking a review.

I am well aware that Broadcom has announced that it intends to move its headquarters to the U.S.  This does not change a thing.  Press releases of intentions is not the same as physical action.  No move has taken place, prudence dictates that a full national security review occur immediately.  I have seen San Diego defense companies suffer massive theft of intellectual property by agents of China’s government and the defense industrial complex with which it is inextricably entwined.  Fact remains, if Broadcom consumes Qualcomm, theft of their intellectual property by China becomes easier.

I will make every effort to stop this takeover.  I believe President Trump and Secretary Mattis should actively oppose this action through CFIUS and any other resource at their disposal.  Meanwhile, on March 6, Qualcomm stockholders are well advised to look beyond the economics of the sale and to the American Flag at Fort Rosecrans past which many soldiers, sailors, Marines and Coast Guardsmen sailed to protect our security.

Now is the time for economic patriotism. Our future, both in America and here in San Diego, depends on it.

Hunter, R-Alpine, represents California’s 50th Congressional District.