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Generational Dynamics World View
*** 14-Mar-18 World View -- Trump blocks Broadcom acquisition of Qualcomm over national security

This morning's key headlines from GenerationalDynamics.com
  • Trump blocks Broadcom acquisition of Qualcomm over national security
  • Government urges not doing business with China's Huawei and ZTE

****
**** Trump blocks Broadcom acquisition of Qualcomm over national security
****


[Image: g180313b.jpg]
FBI Director Christopher Wray (L) and CIA Director Mike Pompeo (2nd L) testify to a Senate Intelligence Committee on Feb 13, advising Americans not to buy products from Chinese firms Huawei and ZTE (AFP)

The Trump administration has issued a presidential order blocking the
$117 billion proposed takeover of US-based chip maker Qualcomm Inc. by
Singapore-based chip maker Broadcom Ltd. Excerpts of the order
are as follows:

<QUOTE>"There is credible evidence that leads me to believe
that Broadcom Limited, a limited company organized under the laws
of Singapore (Broadcom) ..., through exercising control of
Qualcomm Incorporated (Qualcomm), a Delaware corporation, might
take action that threatens to impair the national security of the
United States. ...

On the basis of the findings set forth in section 1 of this order,
... I hereby order that:

(a) The proposed takeover of Qualcomm by the Purchaser is
prohibited, and any substantially equivalent merger, acquisition,
or takeover, whether effected directly or indirectly, is also
prohibited.

(b) All 15 individuals listed as potential candidates on the Form
of Blue Proxy Card filed by Broadcom and Broadcom Corporation with
the Securities and Exchange Commission on February 20, 2018
(together, the Candidates), are hereby disqualified from standing
for election as directors of Qualcomm. Qualcomm is prohibited
from accepting the nomination of or votes for any of the
Candidates."<END QUOTE>


Broadcom said in a statement it was reviewing the order and that it
"strongly disagrees that its proposed acquisition of Qualcomm raises
any national security concerns."

Supporters of the proposed merger point to the fact that Broadcom
was a US-based company until its headquarters moved to Singapore
in 2016 because of a merger, and that it was in the process of
moving its headquarters back to the U.S., partly to allay national
security concerns associated with this kind of merger.

A reason that administration officials are giving for blocking the
merger is that Broadcom would curtail investment in the aggressive
research and development program that Qualcomm has been pursuing,
particularly in 5G technology, the new technology that will
substantially speed up data transfers to and from smartphones. If
Qualcomm is slowed down from technology development, it would give an
advantage to Qualcomm's major competitor, China-based Huawei
[pronounced WAH way] Technologies Co., , the world's largest
telecommunications-equipment manufacturer. So, based on this logic,
the administration determined that the merger would pose a national
security risk.

However, as convenient and simplistic as that explanation is, there
are obviously much bigger issues. There has been growing resistance
in both the White House and in Congress to allowing Chinese
investments in the US and imposing tariffs on a broad range of its
imports to punish Beijing for its alleged theft of intellectual
property.

Theft of intellectual property is the real heart of the matter.
Whether based in Singapore of the US, Broadcom has ties to
several Chinese firms, most notably Huawei, the world's largest
telecommunications-equipment manufacturer.

China uses every opportunity it can to force any company wanting
to do business in China to make all its intellectual property
available to a government-controlled company, and hence to
any other Chinese company. It's feared that if Broadcom
acquires Qualcomm, then China will find a way to force the
merged company to turn over all its intellectual property to
the Chinese government.

President Donald Trump has been extremely critical of China's trade
practices well before becoming president. In the last year, Trump has
killed almost a dozen attempted takeovers by foreign countries, and in
all but one of the cases, the foreign country was China. In August of
last year, Trump ordered an official investigation of China's
practices:

<QUOTE>U.S Trade Representative Robert Lighthizer formally
initiated an investigation of China under Section 301 of the Trade
Act of 1974. The investigation will seek to determine whether
acts, policies, and practices of the Government of China related
to technology transfer, intellectual property, and innovation are
unreasonable or discriminatory and burden or restrict
U.S. commerce."<END QUOTE>


This investigation is still ongoing. If the investigation finds
against China, then the US could impose a number of penalties,
probably triggering retaliation.

Computer chips, such as those produced by Broadcom, Qualcomm and
Huawei, are used not only in desktop computers and smartphones, but
also in all kinds of military devices. White House and Bloomberg and US Trade Representative (14-Aug-2017) and AP and Variety


****
**** Government urges not doing business with China's Huawei and ZTE
****


Amazon and Best Buy are now offering a new Android smartphone, the
Huawei Mate SE, with a large 5.93-inch screen and a big battery, for
just $229. However, six intelligence agencies, including the CIA, FBI
and NSA, are all advising Americans not to do business with Chinese
firms Huawei Technologies Co. or ZTE Corp.

In February, FBI directory Christopher Wray testified:

<QUOTE>"We're deeply concerned about the risks of allowing
any company or entity that is beholden to foreign governments that
don't share our values to gain positions of power inside our
telecommunications networks.

That provides the capacity to exert pressure or control over our
telecommunications infrastructure. It provides the capacity to
maliciously modify or steal information. And it provides the
capacity to conduct undetected espionage."<END QUOTE>


A Huawei spokesman responded in a statement:

<QUOTE>"Huawei is aware of a range of U.S. government
activities seemingly aimed at inhibiting Huawei's business in the
U.S. market. Huawei is trusted by governments and customers in 170
countries worldwide and poses no greater cybersecurity risk than
any ICT vendor, sharing as we do common global supply chains and
production capabilities."<END QUOTE>


Well, he's not denying that Huawei could maliciously modify and steal
information, and conduct undetected espionage. So I'll take that as a
"yes," the Chinese are doing exactly that. And 170 other governments
are stupid enough to allow it.

I wrote about this subject
back in
2012, when the House Intelligence Committee warned against doing
business with Huawei and ZTE, and were warning about a "Cyberwar Pearl
Harbor attack" from China. At that time, Secretary of Defense Leon
Panetta warned that chips manufactured by Huawei or ZTE could be
controlled remotely by the Chinese, and develop tools that could
"cause panic and destruction and even the loss of life." For example,
working remoted, China could "derail passenger trains or even more
dangerous, derail trains loaded with lethal chemicals."

I've a part of my career developing chip-level operating system
software for embedded systems, so I know exactly how to do what
Panetta is suggesting. Furthermore, I can tell you that not only is
it doable, it's not even particularly difficult for someone with the
right skills.

Huawei could develop a chipset that works exactly as described
in the public specifications. The chipset could be subjected
to thousands of tests, and they would all work perfectly.

But what Huawei could do is install a "backdoor" into the chipset.
When the chip receives, say, a secret 1024-bit code, then it
will execute commands sent to it by Chinese engineers. Thus,
the Chinese are then in control of any devices with Huawei or
ZTE chips.

As I said, this is not only doable, it's easy to do. The "backdoor"
could not be detected until an attack had been launched, and then
it would be too late.

And since it CAN be done, I'm absolutely certain that it HAS been
done.

Huawei was founded by Ren Zhengfei, a former Red Army engineer. China
has been preparing for war with the U.S. in every possible way.
They've built large, illegal military bases in the South China Sea,
and repeatedly lied about them. They've developed numerous
nuclear-tipped ballistic and hypersonic missile systems designed to
successfully strike and destroy American aircraft carriers, American
cities, and American bases. They've demonstrated a capability to
destroy American communications and GPS satellites. They have
thousands of missiles ready to launch against Taiwan, and they have
large military deployments in western Tibet ready to invade India.

China has been preparing in every possible way for years for a
successful pre-emptive military strike against the United States, and
there is absolutely no doubt that they would also prepare by
installing "backdoors" in all the chips and switches and other
electronic devices that they sell.

Basically, any electronic device linked to a Chinese firm is under
suspicion, because it's almost certain that the Chinese are preparing
to use backdoors and other tools to take control of them remotely in
time of war. The Broadcom acquisition of Qualcomm does not have an
obvious relation to this threat, but an opening might occur in the
future as Broadcom and Huawei continue to do business.

The Trump administration is using every tool it can to prevent
anything that might in the future give Chinese engineers the chance to
control American electronic devices. Killing attempted Chinese
acquisitions of American products is one way of doing that. CNBC and Forbes and Reuters (16-Jan) and CNBC (13-Feb)

Related Articles:

KEYS: Generational Dynamics, Broadcom, Singapore, Qualcomm, China,
Huawei Technologies Co., ZTE Corp., Huawei Mate SE, Ren Zhengfei,
Robert Lighthizer, Christopher Wray, Leon Panetta,
House Intelligence Committee,
South China Sea, Japan, Tibet, India

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John J. Xenakis
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RE: Generational Dynamics World View - by radind - 05-14-2016, 03:21 PM
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14-Mar-18 World View -- Trump blocks Broadcom acquisition of Qualcomm over national s - by John J. Xenakis - 03-13-2018, 09:54 PM
RE: Generational Dynamics World View - by JDG 66 - 06-22-2018, 02:54 PM
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