Fury as Chinese grab arm of UK tech giant ‘on the cheap’

A PIONEERING British microchip firm that was controversially sold to foreign buyers has fallen into the hands of a state-backed Chinese company.

A division of Arm Holdings, which was sold to Japan’s Softbank for £24 billion two years ago, is being sold to a Chinese consortium for £580 million – although some analysts say its true worth is closer to £5billion, leading to fears it has been sold on the cheap.

Arm designs microchips that are used in most of the world’s smartphones and also for connecting digital devices. The deal means Softbank no longer controls the Chinese part of the business – which accounts for roughly a fifth of Arm’s sales. It will also make it easier for China to gain access to closely guarded designs, something that has sparked security concerns because of the consortium’s links with the Chinese government.

Opponents of Arm’s takeover said the Chinese deal proved their fears had been correct, and they accused British ministers of failing to impose tough conditions on who the business could be sold on to. Sir Gerald Howarth, a former Tory defence minister, said Arm’s technology risked being turned against Britain.

Experts had previously warned Chinese firms might build ‘back doors’ into their microchips which allow devices to be secretly hacked. In the US, President Donald Trump has blocked similar takeovers that risked putting American chip companies into Chinese hands.

Arm’s Chinese division may have been sold on the cheap. Its estimated value, according to Reuters, is about £5 billion. Softbank would not reveal why it had sold at such a reduced price, but analysts suggested it could allow Softbank to make further investments in China by refinancing the division.

Sir Gerald said: ‘ The Government should exercise great discretion in releasing British technology secrets to other countries.

‘We should be exercising extreme caution to ensure our technology does not end up being used by the Chinese military. That is not being protectionist, it is protecting Britain’s national interest and the security of its people.’

Under the latest Arm deal, Softbank will surrender majority control of Arm Technology China to Chinese buyers led by Hopu Investment Management, which is backed by China’s sovereign wealth fund and its Silk Road Fund.

Sir Vince Cable, leader of the Liberal Democrats, said the deal was ‘exactly what the Government was warned about’, adding: ‘Now you have got a situation where its technology has been sold to a Chinese company – which like all companies there is under the control of the Communist Party. It completely vindicates the concerns people raised about the takeover of Arm.’

Critics complained Arm’s original sale – announced and completed in less than three months – was allowed through at breakneck pace because ministers were worried about tarnishing Britain’s business-friendly reputation in the aftermath of the Brexit vote.

Softbank said Arm’s deal would allow the company to expand its activities in China. A UK Government spokesman said: ‘While we are aware of the proposed deal and are monitoring the situation, this is a commercial matter for the companies involved.’