15 ms·
Qualcomm, National Security, and Patents
- qubex 9y agoCan somebody please correct this to ’Qualcomm’?
- deleted 9y ago[deleted]
- sctb 9y agoYes! Thanks.
- deleted 9y ago[deleted]
- emiliobumachar 9y agoCould anybody explain why would a Chinese dominance in the 6G standard-setting process would be to the detriment of US national security? Economic strategy, I get, but national security? It's not like only Chinese companies would be able to manufacture 6G chips once they'd set the standard... is it?
- mtgx 9y agoI don't think it's about the standard. It's about Qualcomm making most modems and about who owns Qualcomm. The US government worries that 90% of the modems will be produced by China (Broadcom/Qualcomm + Huawei + ZTE). I think this should absolutely be a concern for US national security. But I also think there's something they're not telling us here. A lot of this sounds like the US government may already have its own backdoors in Qualcomm modems, and they don't want to give that up. Whether that's real or not, the #1 concern is still that China would be able to backdoor any wireless equipment in the US from factory. I don't see any reason why that shouldn't be taken seriously, especially when China requires by law backdoors in Chinese products and services.
- test001only 9y ago> The US government worries that 90% of the modems will be produced by China (Broadcom/Qualcomm + Huawei + ZTE). How is modems produced by Broadcom/Qualcomm categorized as being produced by China? Broadcom is currently headquartered in Singapore and apparently already in the process of moving it to US.
- someguydave 9y agoI suspect USG’s real concern is that the Broadcom CEO will tell them to bring lots of money or screw off when USG comes a-knockin’ for special favors.
- zebrafish 9y agoBroadcom wants to kill this part of QCOM's business allowing for Chinese companies to fill the void.
- pertymcpert 9y agoThe article makes it clear that the problem is not what Broadcom will do, but what they won't do.
- RobertRoberts 9y agoMy economics teacher in high school (not a great source, I know) said that no country has ever been permanently conquered through military might alone. But countries have been by economics. If you believe this (or a variation of this idea) then it's reasonable to consider the possibility that China is using, or could possibly use, economics as a weapon.
- YCode 9y agoChina is definitely doing this already, more effectively than any other country they view economics and other alternative forms of warfare as the bread and butter of diplomatic policy and they are very good at mixing it with realpolitik when for example building islands or offering foreign aid.
- adventured 9y agoI agree, they're very clearly doing that already. Fortunately there's not much new about it however. Japan was supposed to conquer the world with its economy in the 1980s. Every headline breathlessly touted that fact. It was seemingly universally believed. They had a vast trade surplus, their market was hyper restricted to outsiders, they were rapidly generating wealth and had a higher GDP per capita than the US. The Japanese were conquering one industry after another, whether traditional industrial or electronics, and frequently accused of dumping as they went. Sound familiar? Today: US GDP per capita: $60,000 Japan: $38,000 If China does everything right, somehow avoids any recessions or depressions, sees no major consequences from dictator Xi, magically stops accumulating debt at a torrid pace - in about 20 years they'll finally catch up to the US economy in size. Given their population base, maybe it is inevitable; it won't be easy however. The US has been a comparatively very well oiled economic juggernaut for 150 years, and it's still rolling, commonly outpacing far smaller economies in growth. No country in world history has put together an economic stretch like the US has since the Civil War. China has a lot to prove about being able to manage something like that, especially under a power hungry dictatorship and utilizing a command & control tilted model. Filling in economic slack is the easiest part of growing an economy, that's where all the talking heads got Japan so wrong. Today all the talking heads are extrapolating China's easy fill-in-the-slack growth forward perpetually. They're going to be wrong again, the question is to what degree.
- jancsika 9y agoBecause as the stories derived from the Snowden leaks show, nation-states hold vast troves of exploits and tricks up their sleeves to break and bypass security. Imagine a card game with the object of getting the best hand. Three communal cards are placed on a table face up. China and U.S. each hold their own cards which they don't show each other. Now imagine that China, the U.S., and a set of international researchers acting in good faith all interact to decide which communal cards are placed on the table face up. The researchers can give whatever constraints they want-- maybe they want all face cards, or all the same number or suit. The U.S. and China can "play along" while at the same time making choices within that set of the researcher's constraints to maximize the chance that they have the winning hand. U.S. and China can even guide the researchers away from one set of constraints to a different set if it improves their odds of winning. So if U.S. gets to guide the constraints exclusively they greatly increase their chances of winning.
- dis-sys 9y agofrom the article - > There is a certain amount of irony here: the government is intervening in the private market to stop the sale of a company that is being bought because of government-granted monopolies. wait, what the author expect the US government to do? To give the deal green light so bigger monopolies can be created by such merges? Maybe Qualcomm should learn something and start talking to banks to acquire Intel. Just borrow a couple hundred billion from banks, like what Broadcom did, what can possibly go wrong?
- ksec 9y agoThis article doesn't make any sense to me. They are assuming, if Broadcom moves back to US, and bought Qualcomm, they would reduce its R&D and future contribution of 6G, hence all other gibberish. ( It is actually in Broadcom interest to stay at the top of the standard setting committees ) How would they force Qualcomm to continue its R&D for 6G even if they stay on their own? How would they know, even if Qualcomm continue its R&D, those tech will be made into 6G standard, and not any Chinese competitors? Or any European Allies, like Ericsson or Nokia.
- bryanlarsen 9y ago"It is actually in Broadcom interest to stay at the top of the standard setting committees" Broadcom is doing a leveraged buy-out via debt. So they need some sort of quick cash to avoid being swamped by debt. With that sort of debt load, the short term trumps the long term because if you don't deal with the debt in the short term, there is no long term to worry about. "How would they force Qualcomm to continue its R&D for 6G even if they stay on their own?" They don't, but Qualcomm has a good history of ignoring activist investors who call for them to split their chip-making and patent trolling arms. "How would they know, even if Qualcomm continue its R&D, those tech will be made into 6G standard, and not any Chinese competitors?" They don't, but they do know that Qualcomm has successfully done so in the past, and that it won't happen if they don't even try.
- freyr 9y ago> "patent trolling" Qualcomm generates a lot of IP, but don't they also implement that IP in their chipsets? Does "patent trolling" now just mean enforcing their IP rights?
- sturmen 9y agoAgreed: Qualcomm is not a "patent troll", they're a normal company with a very sizable IP portfolio they rightfully innovated and use in their own products, as well as licensing to other companies. Whether they abuse their market position is its own question, but they have nothing to do with companies that were founded solely to buy vague "shopping cart" patents and make money only via lawsuit settlements.
- dreamygeek 9y agoA very clever move by Trump indeed. Something that I wasn't expecting at all. This will surely delay China's streak of Domination in the Telecom sector.
- dqpb 9y agoI guess relying on capitalism to build a country would fail if foreign countries could just buy out your most important companies.
- adventured 9y agoThe premise under Capitalism would be that the state-sponsored / state-owned corporations were acting as conquering agents and should be treated as a form of invasion in terms of national defense. The theory is that it'd be defending the rights of the people to not be brought under the heel of a conquering foreign government. Such trade would be regarded as a military action on behalf of the foreign country, since under Capitalism the government has no role to play in the economy in terms of owning & operating economic assets.
- mark_edward 9y agoThis has been false from the beginning though, you are referring to an imaginary capitalism that never existed.
- ferongr 9y agoIt's too late for Europe. Open a VDSL FTTC cabinet or look at CPE and OLTs and ONTs and it's all Huawei/ZTE crap.
- _pmf_ 9y agoMake no mistake[0]: "national security" means "we must be able to strong arm the company into giving us private keys for HW trust domain". [0] Excuse the Obamaism
- swyx 9y agoHN readers regularly miss the point of Ben's posts. I admit I'm a bit of a fanboy but sometimes I wonder if this audience just doesn't "get" Stratechery. Ben doesn't really care about Qualcomm here. It's just a poster child for what in his view is actually wrong: technology patents. Let me quote for those who skimmed: "There is a certain amount of irony here: the government is intervening in the private market to stop the sale of a company that is being bought because of government-granted monopolies. Sadly, I doubt it will occur to anyone in government to fix the problem at its root, and Qualcomm would be the first to fight against the precise measures — patent overhaul — that would do more than anything to ensure the company remains independent and incentivized to spend even more on innovation, because its future would depend on innovation to a much greater degree than it does now. The reality is that technology has flipped the entire argument for patents — that they spur innovation — completely on its head. The very nature of technology — that costs are fixed and best maximized over huge user-bases, along with the presence of network effects — mean there are greater returns to innovation than ever before. The removal of most technology patents would not reduce the incentive to innovate; indeed, given that a huge number of software patents in particular are violated on accident (unsurprising, given that software is ultimately math), their removal would spur more. And, as Qualcomm demonstrates, one could even argue such a shift would be good for national security." IMO this is the more controversial claim he makes and nobody discusses it. I think I am in favor but I'm no legal expert. We just take it on faith that the patent system is the way the world works, but what if it's only the way the world -used to- work?
- Nokinside 9y ago> The removal of most technology patents would not reduce the incentive to innovate; Software patents are different beast than other patents. In the realm of hardware patents and IP are enable profits for fabless R&D. It's true that patent system requires overhaul: * A some form of compulsory licensing for all patents after 5 years. Pricing trough auctions or arbitration. IP owners can't decline to license but they can still enjoy license fees. * Software patents with much stricter requirements and very low priced compulsory licensing (discourages patenting when profits are low). No license fees for open source software.
- api 9y agoTrade policy is one of the few areas where I agreed with Trump. I still couldn't vote for him because of his narcissism and his racism, but now that he's president I do hope that he pushes back against China. Our trade policies with China are grossly unfair and I agree that they are effectively self-sacrificial. China is extremely protectionist and economically nationalistic, and is benefiting greatly by playing this off against America's openness and globalism. We keep expecting them to come around and play our game, but as has become apparently with recent political shifts in China (no more term limits, etc.) they aren't and they won't. They're not playing the globalist game. They're playing for their own national interests.
- TheArcane 9y agoLooks like most of the US tech community is welcoming this decision. It's interesting to imagine their reactions when foreign governments intervene to block American companies acquiring their native companies. Eg. the Dutch government blocking Qualcomm's takeover of NXP. (EU stalling the acquisition to investigate antitrust issues is different.)
- Analemma_ 9y agoI'd have done the same if Broadcom were an American company. I oppose it because I pretty much reflexively oppose all mergers of huge companies leading to more consolidation: the evidence is overwhelming that this is harming competition and increasing prices across a variety of business sectors. As for the national security aspect, I don't give a shit. Trump did the right thing for the wrong reason.
- vermontdevil 9y agoAnd this is a private equity play - buy the company. Strip it of its assets, ignore any future R&D opportunities and move on as soon as all revenues are exhausted. Hate these type of moves.
- ksk 9y ago>And this is a private equity play - buy the company. Strip it of its assets, ignore any future R&D opportunities and move on as soon as all revenues are exhausted. How have you established that this is the most likely outcome?
- pythonaut_16 9y agoThat should be called a locust merger
- whatok 9y agoPrivate equity? Both of the companies are publicly listed in the US.
- dopamean 9y ago> Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States. I have a question about this. If the US government believes Chinese dominance in standard would be a threat to US national security would it not be fair to assume the opposite is true? Would US dominance in standard setting would pose a threat to other countries' national security?
- coldacid 9y agoPerhaps, but if that's the case, isn't it better for a democratic nation to be a risk to a dictatorship's national security rather than the other way around? Better America be dominant than China or Russia.
- deleted 9y ago[deleted]
- xkjkls 9y agoIf you're from a country that is not allied with the United States, I'm certain they would agree with that. There's a reason the Russians and Iranians aren't clamoring to buy our products.
- caconym_ 9y agoYes. Countries like the US, China and Russia don't just divide up the pie evenly and agree to play nice. At least this move is relatively out in the open. I don't know enough about this domain to really judge the article's reasoning (though it was certainly an interesting read), but as a US citizen, if our government held the interests of foreign powers equal to our own in its decision-making process, I'd be very concerned. Actually, something along these lines has been in the news a lot since Trump took office.
- wyldfire 9y agoInterestingly, the rationale put forth by QCOM and the gov't is not that foreign governments would control the technology. It's that Broadcom has a habit of executing cost cutting measures. I think they may have even made public claims about spinning off QCOM's licensing business if acquired. The claim is that this would effectively reduce investment in wireless tech innovation by US companies. This would make foreign investment more effective/more likely to dominate.
- madez 9y agoThis is an enlightening post. That the USA see influence on technical standards as a threat to national _security_ shows what they are using their own influence for.
- cityofghosts 9y agoPlease explain how our crumbling school system, declining public universities, mass child poverty, student debt crisis, for profit prison industry, and mass incarceration impact national security.