Dominic Cummings’ hopes of building a trillion-dollar UK tech champion in the mould of Apple and Google will be undermined if ministers wave through deals like the $40bn (£31bn) sale of Arm Holdings, one of the company’s co-founders has said.
Pressure is mounting on the government to step in, after US software firm Nvidia said on Monday that it had agreed to buy Cambridge-based Arm, a global leader in providing chips for smartphones, computers and tablets, from Japan’s SoftBank.
The technology investment firm stands to bank an $8bn profit just four years after buying Arm for $32bn, a deal that was cheaper thanks to the fall in value of sterling after the 2016 Brexit vote.
But the Labour party, the science and technology workers’ union Prospect and Arm co-founder Hermann Hauser have called on the government to deploy powers that can block foreign takeovers, or attach conditions to them.
Asked how a sale would fit in to plans by Boris Johnson’s adviser to build a trillion-dollar British tech firm after Brexit, Hauser replied: “Not particularly well, I should think. I’ve heard that [Cummings’ plan] and he’s of course absolutely right but the way you build companies like Apple is by starting with companies the size of Arm, not with a startup.”
The culture secretary, Oliver Dowden, is understood to be considering whether to call in the deal for lengthy examination by the Competition and Markets Authority but has yet to make a decision.
The government can unpick takeovers if they threaten national security, media plurality, financial stability or, as of this year, the UK’s pandemic response.
In a statement on its website, Nvidia said it “intends to retain the name and strong brand identity of Arm and expand its base in Cambridge”.
“Arm’s intellectual property will remain registered in the UK,” it added.
Nvidia’s chief executive, Jensen Huang, told analysts that his business would invest in Arm. “We want to grow Arm and make it become even greater,” said Huang before adding Arm would hire more engineers, spend more on research, and run a new artificial intelligence research centre in Cambridge.
“The UK government will realise that we are making a very significant investment in the UK,” he said. He stopped short, however, of making formal job guarantees and said talks with the national government had yet to begin in earnest.
The shadow business secretary, Ed Miliband, is concerned that pledges offered to secure government support may not be watertight and has called on the government to make sure they are legally binding.
Hauser said the government should use its powers to prevent the takeover, or at the very least attach indefinite, legally binding conditions to it. These would include a guarantee to keep Arm jobs in Cambridge, Belfast, Manchester and Warwick and a promise that Nvidia does not get preferential treatment on new versions of Arm’s chips. Hauser also called for an exemption from US regulations that give the White House powers over the export of products containing American technology.
The Austrian tech entrepreneur said that having a genuinely world-leading company like Arm would be a powerful weapon as the UK enters into trade talks for the post-Brexit era.
“My hope is that the government may be incompetent but they’re not stupid,” he said.
“Once one explains to them what a powerful trade weapon they have … they don’t need to do what Trump does and stop sales [to other countries] but they can use it as a threat in trade negotiations.
“With Arm they have a phenomenal bazooka that you can use to change people’s minds.”
Hauser also warned that Nvidia would “destroy” the Arm business model of licensing its intellectual property rather than producing its own chips, a strategy that has resulted in its technology being almost ubiquitous in consumer electronics.
He said Nvidia would have an incentive to keep new versions of Arm chips for itself. “They can make more than $40bn by destroying it,” he said.
Mike Clancy, general secretary of Prospect, said: “If the UK tech sector is to flourish and create the jobs of the future here in Britain, then we need our crown jewels to be owned and managed in a sustainable way that prioritises investment in the workforce and in research and development.
“It is not too late for the government to take a more hands-on approach to this deal and impose some binding conditions to secure a stable future for Arm that benefits the whole country.”
The prime minister’s spokesman said: “The deal was announced early this morning and we will be scrutinising it in close detail, including exactly what it means for the Cambridge HQ.”
They added that Arm was an “important part of the UK’s tech sector and it makes a significant contribution to the UK economy, we want that to continue to be the case.”