Democracy Dies in Darkness

The Switch

How 5G became a political football in a merger attempt involving two of the world’s biggest chip makers

By Brian Fung

March 7, 2018 at 3:18 PM

A display at the Mobile World Congress on Feb. 27 in the Qualcomm booth shows the journey early 5G phone chip sets have made out of the lab. (Reuters/Yves Herman)

It's easy to forget that many of the electronic devices we take for granted are actually made up of tiny components sourced from dozens of companies. But now a merger attempt involving two of the world's largest computer chip makers is drawing renewed attention to that vast commercial ecosystem — and raising big questions about America's future leadership in the technology sector.

Broadcom's possible takeover of Qualcomm provoked a letter to both companies this week from U.S. officials, citing fears that the merger could make it easier for countries such as China to hack or spy on American businesses. Part of the concern stems from a fear that under Broadcom, which is incorporated in Singapore, U.S.-based Qualcomm could scale back its investments in developing 5G, a new mobile data standard that's designed to complement and succeed the 4G LTE that's common on mobile phones and tablets today.

In response to the letter, Broadcom told U.S. officials Wednesday that, if its bid for Qualcomm succeeds, it's going to double down on 5G development. Promising to make United States "the global leader in 5G," Broadcom is also dangling a $1.5 billion education fund to sweeten the deal for American regulators.

Why is the focus on 5G so important? Here's what this possible merger can teach us about the future of mobile data.

What's the big deal about 5G? What can it do?

Mobile data has become faster over time, and 5G is no different. Qualcomm's tests have shown that 5G can be as fast — or faster — than what many Americans get on their home broadband connections. During one of Qualcomm's recent demonstrations, for example,  users saw download speeds on 5G data of 100 Mbps or more, compared with 8 Mbps on traditional LTE. Companies such as AT&T; have said that their plans for 5G could theoretically support speeds of multiple gigabits per second. At those speeds, an HD movie could load virtually instantly.

But experts say the real reason to get excited about 5G has hardly anything to do with the download speeds. The chief selling point, according to analysts, is the technology's reliability. It features much lower lag compared with other forms of mobile data, meaning any device that requires a constant connection can be assured that no data will be dropped or delayed in transit. This could be huge for self-driving cars, virtual surgery or other high-tech applications where losing a packet of information could mean the difference between life and death. It could also support a wealth of other smart appliances, such as Internet-connected televisions, home assistants and other gadgets in the growing Internet of Things.

If we'll all end up using 5G anyway, why do regulators care how much Qualcomm invests in the technology?

The 5G speed and reliability boost isn't ready for widespread consumption just yet. From finalizing interoperability standards to allocating the necessary airwaves, there's still a lot of work that must be done to make 5G a reality. One of the biggest players in this space has been Qualcomm. But there are a host of others around the globe, including Broadcom and China's Huawei, who are racing to become the dominant suppliers and vendors for a technology that by 2025, according to the industry group GSMA, could lead to more than $1 trillion in annual revenue for cellular carriers alone.

Whichever chipmaker emerges as the most powerful in this battle for 5G leadership will not only get enormously rich, but will also see its equipment embedded in billions of devices around the planet. For some, the prospect of those chips being foreign-made — as opposed to American-made — presents a threat.

What's the worry?

Let's turn to that letter from CFIUS, or the Committee on Foreign Investment in the United States. The multiagency panel is a group led by the Treasury Department that assesses the national security risks of foreign investments. In this case, it has a say because Broadcom is incorporated in Singapore — though the company has plans to relocate to the United States.

In the letter, U.S. officials said that Huawei and other Chinese companies are working quickly to outmaneuver other companies in 5G by ramping up research budgets and securing patents on the technology. Huawei last month announced its first 5G chip for mobile devices; executives say they've poured $600 million into research on 5G, and there's no sign of stopping.

“While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,” the letter read. “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.”

Those “well-known” concerns refer to fears that Chinese firms could build secret back doors into their chips that, when installed in consumer devices, could allow foreign  governments to covertly monitor U.S. officials or businesses.

How real is this threat?

Some national security officials have gone to extraordinary lengths to respond to the issue. In January, a White House memo proposed that the Trump administration begin building  a nationalized 5G network. The proposal, drafted by a National Security Council staffer, argued that a 5G network controlled by the federal government was the surest way to maintain its security. But the idea was quickly condemned by policymakers across Washington as an unprecedented departure from history; the United States has never had a nationalized communications infrastructure. The author of the memo soon left the White House.

The episode highlights the severity with which some inside the Trump administration view the risk. Still, other cybersecurity experts say policymakers have overestimated the threat.

“It overstates the Chinese dominance a little bit, I think,” said James Lewis, senior vice president at the Center for Strategic and International Studies, a Washington think tank. “It isn't as bad as they say.”


Brian Fung covers business and technology for The Washington Post. Before joining The Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.

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The Switch

How 5G became a political football in a merger attempt involving two of the world’s biggest chip makers

By Brian Fung

March 7, 2018 at 3:18 PM

A display at the Mobile World Congress on Feb. 27 in the Qualcomm booth shows the journey early 5G phone chip sets have made out of the lab. (Reuters/Yves Herman)

It's easy to forget that many of the electronic devices we take for granted are actually made up of tiny components sourced from dozens of companies. But now a merger attempt involving two of the world's largest computer chip makers is drawing renewed attention to that vast commercial ecosystem — and raising big questions about America's future leadership in the technology sector.

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