In late July, Bloomberg reported that NVIDIA, the US chip company, was in in-depth talks to buy ARM, SoftBank’s BRITISH chip design arm. Subsequently, it was announced that the deal was expected to be finalised by the end of August, with a potential $40 billion deal. But the news has been criticised by many in the UK. British MPs have urged the government to intervene in the deal to protect Britain’s “national interests.”
British media, including Reuters and the Financial Times, have also explicitly opposed the Avenda takeover and called for government intervention.
ARM is the world’s leading provider of semiconductor intellectual property (IP). More than 95% of smartphones and tablets worldwide use arm architecture. ARM designs a large number of cost-effective, low-energy RISC processors, related technologies and software. ARM’s technology is characterized by high performance, low cost and low energy consumption. Dominant in the field of smart phones, tablets, embedded control, multimedia digital and other processors.
FT: ARM’s fate is crucial to Britain’s future.
The sale of Cambridge-based ARM to Avda could do more harm to British interests, Reuters said in a September 8 comment.
First, while British start-ups are thriving, there are few large technology companies, a major weakness in the UK. Because large companies typically invest more, and they exist, they help ensure access to critical technologies. Although Japan’s SoftBank Group bought ARM for $32 billion in 2016, it is already one of the few big technology companies in the UK.
If Avda buys ARM, it makes sense to bring ARM engineers into the U.S. team. But such a move would lose nearly 3,000 jobs in the UK and weaken Cambridge’s position as the UK’s “technology hub”.
Second, the takeover could undermine Britain’s “technical sovereignty”. ARM now says it has a nearly 90 percent share of the mobile processor market and a comparative advantage in self-driving cars. If Avda were to buy ARM, it would be tantamount to handing over the intellectual property to a US company, which could leave ARM mired in an increasingly bitter “technological conflict” between the US and China.
But British Prime Minister Boris Johnson has the power to block the deal. While the UK lacks an agency equivalent to the Committee on Foreign Investment in the US (CFIUS) to “control” overseas buyers’ acquisitions of domestic assets, UK law effectively allows the government to intervene in transactions that could threaten “national security”. In addition, the UK is expected to pass legislation to protect companies such as ARM that design “instruction set architectures” for computer processors.
While such intervention could be risky and damage britain’s image among overseas investors, Mr Johnson must do so if he really wants to boost the UK’s “technological ambitions”.
In an August 30 commentary, the Financial Times made a similar point: US tech giants, including Google, Amazon and Microsoft, already control most of the world’s key data, the lifeblood of the modern economy.
The US has just forced the UK to change its decision to work with Huawei to build a 5G network. Now, Avda is in talks to buy ARM.
Indeed, HERMANN Hauser, ARM’s founder, has previously told the Financial Times that any acquisition by Avda would move ARM’s headquarters from Cambridge to the US, subjecting arm to US scrutiny on the grounds of “national security”. If A vida’s acquisition is successful, the UK will move further away from America’s vassal state.
The article points out that in the 20th century, the strength of national sovereignty depended on tanks, warships or nuclear forces. But in the 21st century, intellectual property, data and computer code have influenced the power of national sovereignty. The EU has recognised the urgency and importance of re-establishing “digital sovereignty”, and The UK seems to be lagging behind.
Given ARM’s commercial success and its position in the UK technology industry, the government should give stronger support. The government should do all it can to encourage ARM to return to the open market. Or, as Mr Hauser envisions, have ARM listed jointly in London, Amsterdam, New York and Shanghai to ensure ARM’s independence. But if these fail, Britain’s “digital sovereignty” could evaporate further.
At present, the media said the deal is still in the negotiation stage. The Daily Telegraph quoted sources as saying on August 29th that the UK government was unlikely to intervene, although Mr Hauser and other former ARM executives were explicitly opposed to the takeover. The British government usually blocks overseas acquisitions only on the grounds of “national security”. But the US is an “ally” and is therefore unlikely to stand in the way.
“From the government’s point of view, the UK is a free trade country,” the source said. Another government spokesman said the deal was purely a commercial matter.
For now, there is speculation that the deal could still fail. ARM announced the cancellation of its past plans to classify the Internet of Things and data division as a subsidiary of SoftBank Group. Richard Windsor, an independent analyst, said the recent rise in SoftBank’s share price had eased the pressure on it to sell ARM assets.