President Trump on Monday blocked Broadcom’s $117 billion bid for the chip maker Qualcomm, citing national security concerns and sending a clear signal that he was willing to take extraordinary measures to promote his administration’s increasingly protectionist stance.
In a presidential order, Mr. Trump said “credible evidence” had led him to believe that if Singapore-based Broadcom were to acquire control of Qualcomm, it “might take action that threatens to impair the national security of the United States.” The acquisition, if it had gone through, would have been the largest technology deal in history.
This US administration would eventually stumble onto doing the right thing – infinite monkeys and all that – so here we are. To explain why this is a good move, Ben Thompson’s article about this issue is a fantastic, must-read explainer.
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.