The Arm sale is rapidly descending into a messy arms race; Jon Honeyball shows the way forward

The UK government is launching an investigation into the sale of Arm to Nvidia. To recap, in September last year the current owner, Japanese conglomerate SoftBank, announced that it had agreed a $40 billion sale to Nvidia. The offer consists of $12 billion in cash, $21.5 billion in Nvidia shares, $1.5 billion in equity to Arm employees and $5 billion depending on the financial performance of the Arm arm of the new company.

But wait! Oliver Dowden, the UK culture secretary, has written to the Competition and Markets Authority (CMA), telling them to start a “phase one” investigation. Given the deal was first announced several months ago, we can’t accuse him of rushing. In the words of the wonderfully chewy government statement: “The secretary of state believes that it is or may be the case that the interests of national security, being a public interest consideration specified in section 58 (1) of the act, are relevant to a consideration of the relevant merger situation.” Phew.

The CMA has until the end of July to produce an initial report covering jurisdictional and competition issues, and the question has been raised of “national security issues”. If this investigation finds against the sale, we might move to phase two – which could block the sale.

Not everyone was in favour of the sale in the first place. Hermann Hauser, one of Arm’s co-founders, told The Guardian last autumn that “it is very much in Nvidia’s interests to kill ARM”. (“ARM” specifically relates to the architecture, Advanced RISC Machines, while “Arm” is the name of the company.) In a New

Statesman article, Hauser reportedly went even further: “They are the semiconductor company that can buy Arm to destroy it – and it is very much in its interest to destroy Arm because they [would] gain a lot more than the $40 billion that they pay for it.”

The logic here is that Nvidia is a customer of Arm, along with dozens of other companies. Letting Nvidia control the platform and intellectual property (IP) would allow it to have undue power over those other firms. It could, for example, ensure that Nvidia had first access to new capabilities – although Apple shipped 64-bit ARM chips before Arm itself had a product.

Obviously there’s the question of bundling as well. What if Nvidia decided that the licensing for core CPU functions was a lot cheaper if you used Nvidia

GPU technologies too? Or if it mandated that ARM CPUs had to use Nvidia GPUs? There’s the possibility of Nvidia, one of the largest GPU companies in the world, joining up with Arm, one of the largest CPU companies in the world, to create a behemoth.

And then there’s the small matter of jobs. SoftBank promised to allow Arm to keep working in the way it always had, with its headquarters here in the UK. Would Nvidia do the same, or simply ship the key people to the US and close up shop here? It made all the right noises at the time of purchase, but who really knows?

There’s a potential exit from this mess. It’s apparently possible for Arm to make an initial public offering on the London Stock Exchange, and for third parties to buy shares. After all, it’s hard to see what Nvidia would gain, as a core licensee of ARM, by owning it compared to its current relationship unless it was wanting to leverage that dominant position.

Personally, I’m completely in favour of Arm staying a nominally UK enterprise. Founded in Cambridge, with offices around the UK, it’s a shining example of what we do incredibly well in this country. IP is a hotbed of innovation here. There’s a reason why, for example, most of the Formula 1 teams are headquartered in the UK. Look at companies like Ricardo, which is based in the Midlands and makes engines for McLaren, does motorbike engine design work for BMW and produces gearboxes for Bugatti, amongst a galaxy of other tasks. And do I really need to talk about our R&D work for the Covid-19 vaccination rollouts?

As always, of course, politics will prevail. I can’t imagine that Joe Biden is smiling with delight at the thought of a shining US company being prevented from buying Arm, but I can predict who will blink first if it’s brought up as a bargaining chip in a UK/US trade agreement.

On the flip side, with the ongoing US/China unpleasantness over trade, and the growing realisation that the world is held hostage to Taiwan’s chip-building facilities, it’s time that money was invested in chip fabs here in the UK that focus on UK-owned IP as a strategic position. And in the broader view, it’s time that the UK celebrated and supported its leadingedge IP generators. Keeping Arm within the scope of the UK would be a strong indicator that the government has woken up to our native strengths.

Jon Honeyball is a contributing editor to PC Pro. He’s considered mostly arm-less – unless provoked. Email jon@jonhoneyball.com

I’m completely in favour of Arm staying a nominally UK enterprise. Founded in Cambridge, it’s a shining example of what we do incredibly well in this country