Why Japan’s tech doyen is so attracted to UK talent
SoftBank’s founder can see a big future for microchips – that’s why he was so keen to acquire ARM Holdings
ARM Holdings may not be a household name, but the company’s inventions are at the centre of products we use every day. The British company, which yesterday agreed to be acquired by the Japanese technology giant SoftBank, helps power the smartphone in your pocket and the iPad you may be reading this on.
From a campus in Cambridge, ARM’s teams of engineers builds designs for microchips – the brains of a computer – which it then licenses to chip-making giants such as Qualcomm and Samsung. Billions of these chips are made a year and they end up in almost anything that needs to do lowpower computing.
In fact, the company has been so central to the smartphone revolution that the current generation of mobile computing is described as the AppleGoogle-ARM axis, replacing “Wintel” – the 1990s to 2000s dominance of Microsoft’s Windows and American chipmaker Intel.
As you might expect, the mobile era has become hugely lucrative for ARM. When a manufacturer licenses one of its designs, it is paid a fee and then every one of the billions of chips shipped generates a royalty.
Last year, 15bn ARM-designed chips were shipped and installed in devices and the company’s revenues grew 22pc to £968m. Its margins mean a lot of that is translated into profits, which were up 31pc to £415m.
The company had humble beginnings – spun out of British computer company Acorn in 1990 after developing processors for the BBC Micro – but its success has made it the UK’s eminent tech company. Even before SoftBank’s £24.3bn offer, it was valued at £17bn – the 29th biggest constituent of the FTSE 100 and easily the biggest technology company in Britain.
It has been a symbol of Silicon Fen – the technology cluster around Cambridge with strong links to the city’s university. ARM employs just over 1,600 people in the UK – most of them at its Cambridge headquarters, including many of the British tech industry’s brightest minds.
But while mobile has made ARM a global technology player, its future is potentially far more promising. While its chips already sit in almost every smartphone, they may well sit in your next washing machine, thermostat, security camera and car – especially if that car drives itself.
This new wave of computing, known as the “Internet of Things” (IoT), was described by SoftBank founder Masayoshi Son as the “next paradigm shift”.
ARM, which tends to take the long view, has had it in its sights for years. When Warren East, the company’s chief executive of 12 years, stepped down in 2013 he said it was partially because the company needed someone who could commit to its vision for the next decade.
ARM has had some early successes in the IoT, leading use of its chips to rocket in recent years. From 1.6bn in 2005, shipments grew to 6.1bn in 2010 and 15bn last year. But its advantage is not as clear cut as in other markets. While the company has more than 85pc of the mobile computing market, it has about 25pc in the IoT, and Intel – which disastrously missed out on the smartphone gold rush – is determined not to miss out.
ARM falling into foreign hands was labelled a blow for dreams of a strong, independent UK technology sector by some yesterday. A standard bearer for British innovation, it has been the closest thing that Britain has to a Google or Apple.
The deal was also a bolt from the blue: few expected anyone who might be interested in ARM to be able to buy it, given the complicated antitrust issues that would arise. SoftBank, which said it has no related businesses, said it has not made the deal subject to any regulatory conditions.
“There was a lot of surprise,” says Simon Segars, ARM’s chief executive, who will be staying put along with the rest of the company’s management after the deal. “We have prided ourselves on our independence and for the last 18 years we haven’t had a majority shareholder.”
But any fears will have been dampened by SoftBank’s promise to double staff numbers in the UK over five years – a commitment that will be monitored by an independent auditor.
And Mr Son insisted that the company is now set up for the long run. “ARM being as a public company could not be aggressive enough,” he said. “It had to carefully balance the bottom line. I will encourage them to invest further: ARM is going to be everywhere on IoT.”
‘I will encourage them to invest further: ARM is going to be everywhere on the Internet of Things’