Arm wrestle

Arm Holdings is the largest company in Cambridge, or at least it was until it was acquired shortly after the Brexit vote in 2016, by Softbank, the Japanese conglomerate. One reason Arm is not terribly well known (even in Cambridge!) is that it does not manufacture anything but rather is a world leader in processor design (most notable is Arm’s design of Apple’s new M1 chip). They are particularly well known for their low cost, low power, low heat chip designs. As a designer, they have a neutral business model based on technology licensing that means they sell to many of the main chipmakers.

At the time of its acquisition, Arm was, by far, the largest UK technology firm and although it allowed the deal to proceed, the UK Government required the Japanese firm to promise to retain Cambridge as the main centre for ARM’s research and to double employment here. In 2020, Nvidia, the largest chip manufacturer in the US (and third-largest globally) sought to acquire Arm from Softbank and, unsurprisingly, that deal has drawn scrutiny from regulators around the world including from the EU and from China despite assurances from Nvidia. Just this week, the UK digital minister referred the case to the Competition and Markets Authority (CMA) on national security grounds.

Herman Hauser, one of the founders of Arm and a leading entrepreneur at the heart of the Cambridge ecosystem spoke out strongly against the Softbank deal in 2016 calling it a ‘sad day for technology in the UK‘ when the deal went through  He has had similar or even stronger concerns about the Nvidia deal, calling it ‘a disaster’.

Other countries have also stopped tech acquisitions on various grounds whether on competition or national security. For example, in 2018, the Trump Administration stopped Broadcom, based in Singapore, from acquiring Qualcomm. and many other countries would not even countenance a possible acquisition of a leading domestic technology firm.

Should the UK government have allowed the Softbank acquisition to go ahead in 2016? Having allowed the acquisition five years ago, is there any logic in stopping the Nvidia acquisition now since some could argue this is just moving Arm from a Japanese to an American company?

Is technology somehow different? In other words, are governments justified in restricting mergers or acquisitions in the tech sector more than they might in other sectors?

What about emerging economies? Should they be more open to foreign acquisition/investment or would this undermine their future growth prospects?