QUALCOMM’S MONOPOLY IMPERILS NATIONAL SECURITY


Imagine that there was only one lightbulb manufacturer in America. What would be the result? Lightbulbs are, after all, an essential component of American life. Without them, we all live in the dark.

We might expect the sole maker of lightbulbs to charge very high prices for its essential product—but let’s leave aside those sorts of anticompetitive pricing issues. The more significant issue, from the perspective of national security, is that the entire U.S. population would be at risk if that one manufacturer failed. The failure might be the result of malice, theft or accident. Whatever the cause, the results would be catastrophic.

Yet key voices in the national-security establishment argue that America should ignore a similar risk to its economy and security. They advance the view that a single manufacturer of a product critical to national defense should be, in effect, protected from competition.

The case involves Qualcomm, a company that holds patents on several processes for the design and manufacture of wireless silicon microchips, which are necessary for virtually every mobile device to communicate with the broader mobile network. Such chips are integral to functions like app-based location services that undergird our wireless economy.

The Federal Trade Commission sued Qualcomm in May, and a federal district court found that the company was using its monopolistic market position to force chip purchasers to pay unnecessary and excessive licensing fees. At that time, the case was perceived as a typical antitrust matter without national-security implications.

But then, on appeal, the Energy and Defense departments entered the fray on Qualcomm’s side. They argued to the appellate court that Qualcomm, as the last remaining American mobile-chip manufacturer, needed to be protected from competition so that it could remain economically viable and retain the ability to provide the military with vital chip components. To put it colloquially, the government thinks Qualcomm is too important to fail.

That viewpoint is not only unwise, it’s inconsistent with history and inimical to national security. Being dependent on a single source for critical components puts the U.S. in peril. Having only one provider gives rise to a technological version of “monoculture risk.” That’s when farmers plant only one variety of a crop—such as the Gros Michel banana—which diminishes genetic diversity and increases vulnerability to disease. Banana wilt devastated Gros Michel yields in the 1950s, and similar diseases could wipe out other monoculture crops today.

A monoculture technology system likewise poses substantial risks. If there is some critical flaw in the single system on which the U.S. is dependent, its failure would be catastrophic. These technical vulnerabilities are especially risky in security-sensitive industries such as telecommunications. American reliance on a single chip provider creates an inviting target for adversaries, who would need to find and exploit only one vulnerability to execute a destructive cyberattack.

The U.S. has long struggled to maintain at least two providers of most critical military systems. The government subsidizes two builders of submarines. It purchases military aircraft from more than one source. It also relies on open standards in technology to foster many suppliers, allowing companies to compete in the open market while offering products that have similar capabilities and are interoperable. No strategic analyst could ever imagine voluntarily relying on only one supplier of arms or materiel.

In the Pentagon’s view, maintaining the company’s economic health is also essential because it is a critical player in the competition with China to develop 5G technology. To be sure, it’s important to support the viability of U.S. firms that can compete with China on 5G, but this hardly justifies the risks of a monoculture in the defense-industrial base.

Further, the argument mistakenly links two national-security issues in an artificial way. Qualcomm doesn’t need protection in the wireless chipset market to strengthen its competitive edge in the 5G race. To the contrary, it has every incentive to develop leading 5G technologies even in the absence of protection in the chip market.

In the technology race against China, the U.S. should prefer to let competition drive innovation rather than support exclusive national champions. Apart from the economic inefficiency, a single-source national champion creates an unacceptable risk to American security—artificially concentrating vulnerability in a single point. The government’s argument in support of Qualcomm isn’t prudent, and if courts accept it, the result would be a self-inflicted wound to U.S. national interests. We need competition and multiple providers, not a potentially vulnerable technological monoculture.

Or, to put it bluntly, we need more than one lightbulb maker.

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