US Tech Firms Bypassing the Pentagon to Protect Deals in China

Given how many US companies have moved their legal corporate headquarters to foreign countries in order to avoid taxes, should questions about their ultimate loyalty be a surprise? JL

Olivia Solon reports in The Guardian:

Silicon Valley companies are shying away from selling cyberwarfare services to the Pentagon to avoid jeopardising their relationship with the Chinese market. If they embrace the government too tightly it risks costing them the China market – to major technology companies that’s a problem for profitability.
Silicon Valley companies are shying away from selling cyberwarfare services to the Pentagon to avoid jeopardising their relationship with the Chinese market, a leading geopolitical strategist has suggested.
Peter Singer, an author and senior fellow at the New America Foundation thinktank, said the United States and China are engaged in a new cold war – being fought partly in cyberspace – that “could turn hot”.
Known tactics in this new cold war include Chinese cyber-spies stealing secrets relating to the US military’s F-35 stealth jet to build a clone warplane. Meanwhile, China has complained that the US takes advantage of its power to “unscrupulously monitor other countries” under the pretense of fighting terrorism.
China’s hi-tech military capabilities – including the world’s fastest supercomputer, a soon-to-launch “unhackable” quantum communications satellite, a hypersonic weapons programme and armed ground robotics – have left the United States trying to play catch-up, Singer explained during a talk at the RSA security conference in San Francisco.
“In the past the government led the way with innovation and industry followed,” said Singer, citing the Arpanet, a precursor to the internet, as an example. “Now it’s the private sector – as seen in the debate over encryption. This is changing the way that government leaders talk – the tone alternates between asking for help and threatening.”
In order to modernise national security operations, the US Department of Defense has been trying to woo Silicon Valley, with the Pentagon setting aside $18bn to invest in next-generation technologies including guided munitions, electronic warfare and robotics.
“The Secretary of Defence [Ash] Carter has come to Silicon Valley more times than he’s gone to war zones like Iraq and Afghanistan,” Singer said.Despite the government’s best efforts, technology companies aren’t being so forthcoming as they frequently rely on China for both their supply chain and enormous customer base. Neither the Pentagon nor Silicon Valley is willing to talk about the issue.
“The Pentagon will say ‘no, no, no this isn’t about any single country’. It’s about China,” Singer said.
Meanwhile companies will say it’s too difficult to work with the Pentagon due to the complicated procurement system.
“Really it’s because if they embrace the government too tightly it risks costing them the China market – to major technology companies that’s a problem for profitability.”