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Should the U.K. Government Form a Coalition to Buy ARM?

With SoftBank’s Masayoshi Son trying to sell ARM, a columnist for the Observer newspaper has a suggestion for the U.K. government (and specifically Brexit Tories), calling the Cambridge-based company “a kind of public-interest commercial company: licensing state-of-the art instruction sets that can be implemented in silicon architecture by everyone. It was in nobody’s pocket.”

Its business, as its chief founder, Tudor Brown, acknowledges, relied on it never betraying its neutrality… A future owner could almost trash Arm in the pursuit of its own commercial ends. Nvidia, reported to be in advanced talks with Son, is just such a possible owner. Rooted in the games industry, it has found to its surprise that its processing units are much in demand as artificial intelligence applications mushroom. Son wanted to sell Arm to an industry coalition that might protect the company’s independence and business model. None could be found, so, desperate for cash, given a string of failed and written-down investments (WeWork, Uber etc), he is now having to sup with a buyer that can only destroy Arm.

Nvidia’s ambitions are scarcely hidden. Once it owns Arm it will withdraw its licensing agreements from its competitors, notably Intel and Huawei, and after July next year take the rump of Arm to Silicon Valley, just as Google has done with the British AI company DeepMind. Arm, and Britain’s hopes to be a player in hi-tech, will be dead.

Ownership is fundamental and the lesson of the story is that unless Britain creates the legal, cultural and institutional framework allowing companies such as Arm (or DeepMind) to have anchor shareholders — or simply allowing founder shareholders to have powerful differential voting rights as in the U.S. and Canada — we are condemned to inferiority. But even now Britain could act. The government could offer a foundational investment of, say, £3bn-£5bn and invite other investors — some industrial, some sovereign wealth funds, some commercial asset managers — to join it in a coalition to buy Arm and run it as an independent quoted company, serving the worldwide tech industry… if Britain is to develop an industrial strategy, this is how it must act…

A successful capitalism is always about framing innovative private dynamism within a fit-for-purpose regulatory and ownership architecture designed by the state, a reality that neither major party has ever understood. The open question is whether Brexit Tories, forced by reality, might change. This kind of audacious deal could appeal to Johnson and Cummings, a statement of intent to match China in our commitment to a decisive presence in 21st-century hi-tech.

Brexit was meant to give Britain the freedom to make this kind of move.

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