The announcement on Monday that US chipmaker Nvidia is to acquire UK chip designer Arm Holdings from Japan’s Softbank has led to calls on the British government to impose conditions on the $40bn deal.
The politically-charged reaction to the takeover highlights the rise in protectionist sentiment in the west and stands in contrast to the positive reaction to Softbank’s buyout of the Cambridge-based semiconductor group in 2016.
“SoftBank is not a chip manufacturer, so the big threat to the very existence of Arm, which is based on being the ‘Switzerland’ of the semiconductor industry and being neutral, was not an issue when SoftBank took over,” Hermann Hauser, a co-founder of Arm, told fDi.
“Nvidia, being one of the licensees of Arm and a competitor to the other 500 licensees that Arm has, threatens its business model in the most fundamental way,” he added, suggesting the government should intervene to protect the company’s neutrality.
Other concerns focus on Arm’s role as an employer in the UK. The company employs about 3,000 staff across its headquarters in Cambridge, as well as other locations in Belfast, Glasgow, Manchester, Sheffield and Warwick.
“Nvidia 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,” the company said in a statement on September 14.
However, shadow business secretary Ed Miliband said it remains unclear whether Nvidia’s promises to keep Arm headquartered in the UK are legally binding.
“If the government has failed to extract those legally binding assurances it will be a real dereliction of duty that calls into question their commitment to an effective industrial strategy,” Mr Miliband said on Monday.
The prospect of British government intervention increased in June, when the UK expanded the scope of its FDI control regime in response to the Covid-19 pandemic.
“We are investigating this deal further,” a government spokesman was quoted as saying on September 14.
The UK recently made three additional tech sectors (artificial intelligence, cryptographic authentication technology and advanced materials) subject to the reduced jurisdictional thresholds already in place for the military and dual-use, computer processing and quantum technology sectors.
According to law firm Linklaters, 20 of the OECD’s 37 members have implemented or plan to implement similar rules.
“Governments are keen to protect and develop their technological sovereignty through foreign investment screens and even outright bans on inbound investments,” Nicole Kar, head of UK competition at Linklaters, said in a note on September 14.
[The takeover] threatens Arm’s business model in the most fundamental way
In addition to FDI controls, the Arm deal is complicated by US export controls, which the US government uses to prohibit US companies from selling components to blacklisted foreign companies.
Such controls are a key tool in the US-China trade war, particularly in the semiconductor industry, with the US government using its influence over semiconductor supply chains to block Huawei’s access to critical components.
Dr Hauser suggested that an acquisition by an US company could subject Arm to these controls, further compromising its status as a neutral supplier.
“Europe must not become collateral damage in the trade war between the US and China,” he said, calling for a legally binding exemption from US export controls.