Huawei has hit its second snag in an attempted M&A deal in America. In this case the US government aims to force them to divest their October purchase of server technology from a California firm called 3Leaf. The Committee on Foreign Investment did not comment on why the deal was rejected, but it is expected that, as in the case of Huawei’s attempted purchase of 3Com in 2008, that the committee was concerned about the Huawei founder’s membership in the People’s Liberation Army (PLA) 23 years ago.
But then that raises a few questions. First, is the technology owned by 3Leaf crucial to national security? If so then 3Leaf should be banned from selling its technology to any foreign company, as, once it is out of American hands it can potentially travel anywhere. Second, what is the burden of proof necessary to prove links to a foreign military? Quite a few companies in China have links to the government much stronger than Huawei’s, how can a Chinese company know when it is deemed a threat to the United States? Third, is the People’s Liberation Army the only army which a company cannot have remote links to, or are there other ones (outside of countries which we have sanctions against)?
The 3Leaf deal, valued at $2 million, is an exceptionally small deal to receive this sort of scrutiny. We need to be explicit about what exactly makes the deal a risk to our security, or be straight forward about the fact that America is not a place that welcomes foreign capital.