America’s Nvidia is putting down $40bn to buy Arm Holdings but opponents of the deal are already lining up. The proposed purchase of the British chip designer from Japan’s SoftBank has triggered alarm in multiple quarters, including from its co-founder and UK opposition politicians. Arm’s customers, too, are said to be wary. Critics are right to warn more is at stake than the future of a British technology group. As such, the deal should be carefully scrutinised by Boris Johnson’s government.
Arm is not an ordinary company. It is one of Britain’s few homegrown technology successes with global reach. The chips it designs are sold to a range of different customers. Arm-designed components are used in 95 per cent of the world’s smartphones. Critics fear that Arm’s business model, which has thrived on this neutrality, will be destroyed under Nvidia, itself a customer. They also argue that the change of ownership will allow Washington to intervene in Arm’s customer relationships under the US’s swingeing foreign investment regulations.
These are legitimate concerns. Donald Trump has long made clear he sees America’s national interest as lying in a mercantilist approach to business. More recently, amid rising tension with China, the president has shown little compunction in interfering in the operations of technology companies to help pursue foreign policy goals. Nowhere is this more evident than in the tussle for control of the US operations of TikTok, owned by China’s ByteDance. A planned deal with Oracle was initiated by Mr Trump’s threat to ban the video app to address what his officials have claimed are economic and national security threats from China.
Mr Trump’s actions may be extreme but he has recognised that in the 21st century national sovereignty no longer means the possession of an independent defence industry. Countries’ economic fortunes are increasingly dominated by large technology groups — which means global influence is just as much about computing power and control of the relevant intellectual property. This new brand of “technological sovereignty” appeals to Dominic Cummings, Mr Johnson’s chief adviser. Recent actions by the British government, however, including the investment in satellite operator OneWeb, do not suggest a coherent industrial strategy behind the desire to develop technology champions.
The fate of Arm puts the government’s ambitions to the test. Ministers face a difficult choice of whether to intervene or not. Existing grounds for intervention cover national security, media plurality, financial stability or public health. When Arm was sold to SoftBank in 2016, Theresa May’s government extracted commitments from the Japanese buyer, but these run out next year. Nvidia has pledged to retain UK jobs and maintain Arm’s Cambridge headquarters. Arm’s intellectual property will also stay. Given Arm’s importance to the UK tech industry the government should ask the competition regulator to scrutinise the deal. At the very least the government must ensure Nvidia’s commitments are legally binding — and for a lengthy period.
Ministers, however, must use the opportunity to refine Britain’s industrial policy. Mr Johnson’s post-Brexit view of Global Britain is based on the idea of open multilateral trade, an ideal setting for the UK’s buccaneering exporters to thrive. But the context is changing. As the government was forced to recognise in its dispute with the US over allowing China’s Huawei to build Britain’s 5G network, the world is rapidly becoming polarised between powerful trading blocs. Global Britain is in danger of being pulled in opposite directions between America and China. The UK needs to set out a clear vision of its technological and industrial future in order to secure its place in the new world order.