Trump’s Silicon Valley summit falls dangerously short
The chatter is about President-elect Donald Trump snubbing Twitter at this week’s summit with Silicon Valley CEOs. But why aren’t people also asking, “Where the heck was Qualcomm?”
Amid all the press coverage, there was not a word about the world’s third largest semiconductor company, and the second largest in the US.
Was it invited but declined (as did HP CEO Meg Whitman, a former Republican gubernatorial candidate who slammed Trump during the campaign and supported Hillary Clinton)? Or was this a case of PEOTUS taking revenge on a critic, Qualcomm’s executive chairman Paul Jacobs?
The official line is that some companies were not on the guest list because they weren’t big enough and – chortle, chortle – nor was the table. Yet Qualcomm certainly should have passed that test.
It has a market capitalisation of $101bn. Tesla Motors, which did make the cut, is at $33bn. Meanwhile Airbnb, which was invited but sent regrets, achieved an implied valuation of $30bn following a Summer capital call.
Then there is the question of Qualcomm’s importance to not just the US, but the global high technology sector.
It has a market-leading 45 per cent global share in mobile applications processors and after its soon-to-complete acquisition of NXP Semiconductors will become the largest supplier of automotive silicon. Intel did get the Donald’s call and is a huge company, but let’s be honest: mobile and automotive are seeding much broader social, commercial and technological innovation right now than the CPU.
There is an immediate temptation to say that Qualcomm’s absence is another depressing example of the PEOTUS’ peevishness. It’s not entirely unfounded.
One alternative explanation for Twitter’s absence was that it refused Team Trump’s requests to create a ‘crooked Hillary’ emoji, and so got a black-ball one for the big day. Less trivially, Paul Jacobs was perhaps the highest profile signatory to an open letter from 140-odd Silicon Valley luminaries last Summer accusing Trump of campaigning on “anger, bigotry, fear of new ideas and new people, and a fundamental belief that America is weak and in decline.”
The letter concluded that, “Trump would be a disaster for innovation.”
More payback? Perhaps, but notwithstanding Meg Whitman’s stance, other trenchant anti-Trump voices were invited and did opt for jaw-jaw.
They included Tesla’s Elon Musk (Trump is “probably not the right guy”) and Amazon CEO Jeff Bezos (#sendDonaldtospace). Apple and Facebook, targets of some choice Trump rhetoric during the campaign, were also at the table; Musk has gone on to join Trump’s Business Advisory Council.
It’s all very strange – and there is another rather uncomfortable aspect to Qualcomm’s absence.
In addition to the vertical markets in which it leads, Qualcomm is an important company because of its fabless business model, one that has become the economic and innovation template for Silicon.
Qualcomm grew generally unburdened by the progressively increasing costs of semiconductor manufacturing, drawing instead upon fabs owned by TSMC and Samsung. Those still accelerating costs mean that just about any chip design company entering the market today must follow the same course.
Sorry Donald, but the US has no equivalent foundry business by scale whatever Intel (or GlobalFoundries) might tell you, and it is impossible to see it building one any time soon.
If you choose not to understand that then you are basically refusing to understand how high technology works in the 21st Century, and how most jobs are created in hardware.
Even if it turns out that Qualcomm’s management was invited and chose to stick to its guns, Trump’s transitional team could (should!) still have sensibly reached out to another big fabless player such as, say, Nvidia (market cap: $52bn, also bigger than Tesla or Airbnb). Trump turned to PayPal founder Peter Thiel to help choose his guests, and Thiel is anything but ignorant of how semiconductor economics work.
That leads to a conclusion arguably more worrying than speculating over the results of a possible act of spite.
While Trump obviously intended his Silicon Valley summit as ‘a reset’, even the beginnings of a charm offensive, he still framed it very much within how he sees the high tech sector contributing to his Presidency.
Trump wants ‘traditional’ jobs and the bulk of the companies he summoned are, in his view, capable of delivering those in the thousands.
IBM, as represented by CEO Ginny Rometty, unveiled plans to create 25,000 new posts in the US over the next four years just before the summit.
Then go down the list. Trump’s repeated call to Apple has been for it to manufacture in the US. Tesla is home to the concept of the ‘gigafactory’, the first of which it is ramping to capacity in Nevada. Intel is sometimes jokingly described as a massive manufacturer with a small digital design division. Google’s and Facebook’s diversification into hardware could deliver US factory jobs. And so on.
This strategic view renders Qualcomm – and indeed the entire fabless sector – an irrelevance to Trump. That is dangerous.
Amid the ‘cordial’, ‘productive’ and Kumbaya responses from those executives who did meet with PEOTUS, this makes it hard to shake the fear that the US is about to be led by someone who simply does not get the realities of the high technology economy, nor seems willing to entertain any education as to what they are.
In other words, the Donald is still far from being Valley-friendly.