Should the UK government step into to ensure that the sale of Arm Holdings to US chip giant Nvidia doesn’t impact UK jobs?
The news that UK-based tech giant ARM Holdings is to be sold by its current owner – Japan’s SoftBank Group – to US graphics chip giant Nvidia for $40bn has been described by the company’s founder as a disaster that threatens jobs and damages the UK’s ambitions to grow its tech centre.
The organisation – which was originally spun-out out of UK computer company Acorn in 1990 – is best known as the designer of the ubiquitous computer chips that are at the heart of most of the world’s leading smartphones.
It was sold to its current owner for $32bn four years ago – in a deal part-brokered by then Prime Minister Theresa May – which saw SoftBank agree to keep the HQ in the UK until at least September 2021.
In a statement, Nvidia chief executive Jensen Huang has pledged to honour the terms of this deal, to keep the company’s HQ in Cambridge and even to expand the site to build a “worldclass” AI research facility.
However, talking on BBC Radio Four’s Today program, Arm co-founder Hermann Hauser warned that any such pledges are meaningless unless they are made legally enforceable by the government, and that the deal – which will effectively mean that many of ARM’s clients become dependent on a competitor – threatens the firm’s business model.
There are also concerns over the implications of putting a company that is famed for its global reach under the ownership of US firm at a time when the US is engaged in a growing trade war with China.
Arm was once that rarest of things – a bona fide UK based global tech giant. Exactly the kind of organisation that the current UK government claims it would like to see more of. Sadly – whilst much of the expertise has remained in the UK – Arm has instead come to be seen as a classic example of the UK’s famed inability to tap into the economic potential of its most innovative technological advances.
ARM is the beating heart of most quality electronic devices today, and as such should be considered priceless. If Britain has any intention of really becomming a tech giant in the future, then it needs to take back full control, or at least a majority control, of ARM. Whether it is by public ownership, as Labour would probably do, or by simply buying a majority share, it needs to be done. Allowing ARM to slip away, especially to America, where there is no chance of ever getting it back, would be the end of the UK’s hopes to be anything other than a client state.
It’s been remarked that losers are a lot better at picking governments than governments are at picking winners. With $1.8bn in revenue last year – on which it manged to make a loss despite mnufacturing nothing – it’s only a minnow. Its accidental hegemony over the processor ISA market was probably drawing to a close anyway; accelerating the shift to custom designs for big companies and RISC-V for tue rest may be no bad thing. Nvidia is basically buying an engineering team, but when does that ever work?
I don’t think public ownership is a great idea. Aren’t we banging on about Huawei for being too close to their respective government? Yet we expect ARM to remain a competitive global company under a government that has never really proven it can make a success of public ownership.
The government should place legally binding commitments on the sale to protect IPR, that was done when it was originally sold to SoftBank but of course we cannot do that now because Uncle Sam might get mad.
Aside from that the government needs to create a competitive business environment for the tech sector so our best companies don’t get swallowed up by bigger fish
Sadly, I think that boat left the harbour a long time ago. The government should have prevented ARM’s sale (as it should have with many other companies) to offshore investment a long time ago; or at least ensured that at least 51% should be owned by UK investment.
Arm? Isn’t that a Japanese company. You know, where the actual decisions are made.
The problem the UK has is that it does not like industrialists. It is a class thing. Better to be in the city buying and selling securities, what?
Brunel’s son became a solicitor. Much more respectable and risk-free, eh? Aspiring to Be rather than to Do is a Brit vice.
**Typical of UK Ltd. A legal basis should be created, whereby such technical jewels remain in UK control.
>>One cannot imagine a similar event occurring in France.
The sell off of strategic assets continues. Pretty soon the UK will only be fit for providing cheap labour to maintain what we once owned. A majority public ownership is the only way.
It’s also very ironic that the co founders (?), Hermann Hauser and Tudor Brown, should complain now about the sell off to the US. I’m sure their bank accounts didn’t suffer when they originally sold off the company to Softbank. This is how capitalism works, profit is key and once it’s sold ‘we’ have no control over the company, NVidia will do what it wants.
Obviously, if the US gets ARM then Washington will dictate who it can supply to, so all deals and partnerships with China will be stopped, and this will also impact third party suppliers.
Any agreements regarding saving UK jobs are meaningless. Just look at the facts: Cadbury’s, TATA Steel, LG Electronics in Wales, etc. The UK sold down the river again and again and again.
A good article on this from the BBC, here: https://www.bbc.co.uk/news/technology-54142567
I believe if ARM is sold to the US it will disappear fairly quickly, will the government help the UK ?
Not sure what the UK Government can do about this. ARM is owned by a Japanese company, Softbank, which is selling what it owns to an American company, Nvidia. Bit late in the day to start worrying about it now.
The government holds a golden share in Rolls-Royce (aero etc engines), BAE Systems and probably others which make them impossible to take over. The same should be applied to ARM and a lot of companies particularly that grew out of publicly funded universities.
But fundamentally it is the open corporate governance structure that impedes British business so that we have lost pretty nearly all our jewels. The idea that a hedge fund buys X million shares today then votes to remove the Board of an asset rich, sales poor, company tomorrow is exactly what nearly happened to AstraZeneca in 2014 with a hostile bid from Pfizer, a product-poor, sales line rich company which made a lot of money from Viagra then closed the lab in Rochester (Kent not NY) where its benefits were discovered. If it weren’t for Pascal Soriot and the Swedish shareholders, AZ would no longer exist.
My solution would be to relate voting rights to length of time for which shares are held, zero for the first year at least, and with possibly a special class of share for founders as happens in the US. Otherwise ARM will go the way of all the rest.
The intersting innovation in ARM is not only their very complehensive implementation of RISC but also their lucrative and highly complex licencing model which critically depends on neutrality. Being owned by nDivia (nothing against them) would not only put ARM at risk from clients moving to other RISC approaches (such as the open source RISC-V) but also from whatever idiot the Americans vote for this November who may take a dislike for some country or other. ARM’s client base would collapse – I expect Apple to reverse its recent decision on processors for iMac.
RISC is not that new – it was for example a feature of ICL’s Distributed Array Processor of the early ’80s but then the 2900 series machines were years ahead of their time too with 16 access control levels that would have made it pretty impossible to hack, much more so than *nix. I believe VME 2900 still has one big customer – the UK government – but that will probably fold as we have a kamikaze administration in charge.
“UK-based tech giant ARM Holdings”
Tech GIANT? $40bn is 2% of Apple Inc.’s $2 trillion market capitalisation. That’s what I call a tech giant …
Prior to 1980
75% of UK manufacturing was owned by UK sources
By 2010 the position was reversed with less than 25% owned by UK sources
In the case of Asian owned companies inward investment upto BREXIT was positive
American inward investment has been detrimental with a loss of high tech R&D.
Without government strong regulation ALL the main income stream business have been bought up with losses in jobs but more so TAXATION.
We must stop both Brain & Technology drains if the UK is to get back to being a nett Wealth intaker
I was unable to vote, as not for the first time felt none of the options cover the profoundness of the issue.
Option 1 ; as John L. & others note history is full of examples where new foreign owner agreements/promises to UK have soon ended, think with Cadbury’s/Fry it took less than a month. ie Once sold new owners will always do what is in their best interest.Depending upon where in the world they are & who they are it goes beyond capitalism/profit or state rules to their norms/culture,etc. Bit like a war when winning side dictate to losers, used to last centuries, now a few years at best, sometimes down to months, until oppression effects start next change cycle.
Option 2; again as above history shows what happens to nationalised businesses, just the time to get there heavily influenced by political regime & election cycle.
Option 3; New owners plans may benefit the Uk, mostly in short term per history, but never at expense of their plans. As noted ref Apple value (larger than total of ftse 100 best companies), then amazon,google,Facebook,Microsoft, et al, our digital lives, esp younger brits, is owned & controlled by yanks & so what does that leave…
Option 4 ; some sort of hybrid model ..?
Where strategic review determines that majority ownership & operating norms are held in the country. This will clearly never return the full benefits of profit/capitalism but equally only hold back take over, even demise, of national treasures. In this case extending American ownership & control of our digital world & associated life. I’m sure there will be other hybrid options but they are no silver bullet in the long term (what’s that? considered generations historically, then election cycle, now with u-turns,etc maybe even down to days, esp as the digital world drives “instancy”) unless the efficiency & effectiveness of any compromise is maintained & adjusted in an increasingly rapid changing world of reducing timeframes.
Just a tad too late to start thinking of that now. Just like all other UK companies that have been sold off (down the river) eg Cadbury.
All we really have left is service ‘industries’ that can be performed anywhere in the world and tourism
Reduce the tax burden on UK shareholdings by UK individuals, so that it is actually worth investing in UK enterprise again.
Subtly, and by degrees, it has been the war on capitalism aided by the socialist fellow-travellers and UK class-snobbery, and fought via the state tax system that has done for UK industry.
Tell me, is it really worth starting a genuine industrial business in the UK, if only to sell-out to overseas control at the first opportunity to avoid being prey to the taxman, the city and the unions? Look what happened to all of our major industries.
Time was, when the UK made most of the ships in the world. They are now being built in greater numbers than ever before, but not in the UK.
If you allow everybody to nibble at the seedcorn, there will be no harvest, and no farm.
You have to sympathise with Nice Knowing You, has anyone noticed the state of our defence industry? Once a proud flagship for the UK and its equipment manufacturers, now a testament to poor Government leadership over decades, with Samsung leading the way in radar and tactical weapons systems. The UK has to wake up, we need a UK manufacturing capability, whether its next gen ARM, Telecom’s or defence, just cannot rely 100% on international suppliers.
I would like to have had the opportunity to ‘take an interest ‘ in ARM, and a lot of other UK enterprises. But, equity holders havbe had their power diluted, as we now have no power, as we see with corporate looters paying themselves crazy salaries and putting the interests of the equity holders and the people who have the long-term interests of the company at heart.
There really does need to be changed to make it worth investing in a UK enterprise , or to accept that a ‘UK company’ is only a step to getting taken over by a multinational, and the pouvouir filling their boots.
Best get a job with a Government funded operation, where VAT is not paid on any value that might be created, pensions happen with time served, and failure is rewarded with mighty payoffs. Look to e.g. the BBC, NHS, Councils, Civil service etc. for a management sinecure, but don’t bother with a UK company
Steve East: Agree totally, I’ve witnessed the decline of our defence industry over the last 40 years and the sell off to a small number of multinationals, mostly US companies. This has resulted in expertise, control and profits moving off shore and UK talent acting as a maintenance shopfront.
Tony N: agree, if ‘the people’ could invest and maybe hold a controlling interest in UK companies then maybe the direction we take would be different, but the city sharks wont allow that and they are the ones propping up our failing government.
There was a solution/alternative choice offered at the 2019 GE but, after 10 years of chaos, the people voted for more of the same, consider:
“We will ensure that new technologies aren’t just invented here, but are engineered, manufactured and exported from here. We will put British innovation at the heart of our procurement to support local sourcing and reshoring, so that every investment we make strengthens our manufacturing and engineering sectors and supply chains and creates
hundreds of thousands of good, unionised jobs here at home.” Labour manifesto 2019
Another Steve -agreed.
It’s all about power, and it is a combination of our political and economic castes that are selling us all down the river.
U.K. Manufacturing has been decimated by successive governments and greedy investors, stupidly thinking that it is wise to buy from overseas manufacturer and resell to overseas manufacturer instead of making in the uk and selling worldwide. We are now in the unenviable position of having no manufacturing, no suppliers, no customers and no resources, and our business model is to keep recirculating the country’s dwindling wealth boosted by occasional cash injections from the sale of our few remaining assets and the family jewels. New onc head world leading industry, world leading universities, world leading health care, world leading military, etc. Now we have nothing of value….
Over the past decade or so, the value of the Pound has remained low, resulting in British-owned companies being easy takeover targets. As a result, ARM was acquired by SoftBank Group of Japan in 2016 (a sale agreed by shareholders, who undoubtedly made a “tidy packet”). Now it is a case of a Japanese-owned company being sold to American buyers and, even though the “product” is based in the UK, I doubt that the British government will be able to intervene. One answer could be if a consortium of British investors makes a rival bid for ARM but there, I won’t hold my breath.
By the way, Hauser and Brown left Arm decades before the selling to Softbank.