The Guardian view on a Brexit industrial strategy: theatre but no policy
The collision of political rhetoric and commercial reality in Cambridge’s “Silicon Fen” threatens to expose the government’s industrial strategy for what it is: draping a union jack over the wilder edges of global capitalism. Earlier this summer, Boris Johnson sought new powers to block outsiders from picking up British firms, especially hitech ones. Weeks later, it emerged that the jewel in the crown of UK computing may depart from these shores. Ministers said nothing.
That may be because the ownership of the company in question – the world’s most important chipdesign firm Arm – was previously decided by Brexit politics. Just after the 2016 vote, Theresa May, having vowed to defend UK firms from foreign takeovers, blessed Arm’s sale to SoftBank, a Japanese conglomerate, for £24bn. That move came with conditions to double the workforce and keep Arm’s headquarters in Cambridge for five years – a pledge that expires next July. SoftBank is now in talks to sell Arm to Nvidia, the world’s most valuable chip company.
This would be bad for the UK. About 2,500 people work in Arm’s Cambridge headquarters. There would be a brain drain to Silicon Valley. Nvidia’s ownership also threatens Arm’s business model. The Cambridge outfit makes money by licensing its processor designs. Apple’s iPhones are powered by Arm-based chips as are the fridges, cars and drones hooked up to the internet of things. Arm is going big on 5G. Nvidia is one of Arm’s customers. Other chipmakers that rely on unfettered access to Arm’s cutting-edge technology would fret about losing it to a rival manufacturer.
Arm’s co-founder Herman Hauser says the UK’s technology sovereignty is at stake. He’s correct. If Arm were to slip into American hands then the US could, under its laws, decide which companies Arm was allowed to sell to. Mr Hauser sees Arm’s sale as a major step “towards the UK becoming an American vassal state”. Why, he rightly argues, allow one of the “last great European technology companies with a dominant position in mobile phones (to become) part of the US trade armoury? Whether we are allowed to use our own British-designed microprocessors in the UK and Europe will be decided in the White House rather than in Downing Street”.
We have been here before. The US and China are vying for global technological dominance. Last year Arm had to tell staff to stop working with China’s Huawei while its lawyers argued the firm’s chip technology was of UK origin and would not breach US restrictions. The company won the right to supply existing designs to Huawei, but a question mark was placed over future sales. Folded into Nvidia, Arm would be forced to end its China business. The UK’s chips would have become weaponised in a US-China trade war. What if this were to become a US-EU battle too?
A better place would be for the UK to take back control. Daniel Zeichner, Cambridge’s Labour MP, argues sensibly for the UK to take a strategic stake in Arm. If Britain can invest £400m in an untested satellite firm, then surely the state can back a “world-beating” company? Mr Hauser, who remains an Arm shareholder, says ministers could block the Nvidia sale and encourage SoftBank to take the company public, with the government holding a golden share. The state should intervene to support and protect strategically important British businesses. Ministers ought to defend the country’s technological base. Having made a noise about recovering trade policy for Westminster, Mr Johnson shouldn’t be allowed to give up sovereignty over unique UK knowhow to Washington under the guise of a commercial transaction.