The RSMR Weekly Broadcast - The sale of ARM: an issue of national economic sovereignty

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Arm is the darling of the UK’s technology sector with its designs at the heart of the iPhone and most other smartphones. Arm has its fingers in almost every other area of technology too, from fitness trackers to server farms and was on the FTSE 100 until 2016 when it was bought by the SoftBank Group for $32 billion. Arm’s business is in Central Processing Units (CPUs), the processing power of a computer or electronic device. They’ve manufactured 180 billion chips since they started as a company, creating 22 billion in the last 3 years. They now have a market share of over 95%!

They produce CPUs themselves and sell licences for other companies to manufacture them. All Apple devices have Arm architecture within their CPUs and 95% of electronic devices made in China have Arm CPUs. Their client base spans the globe with customers such as Intel, AMD, Broadcom and Qualcomm. Most hardware companies around the world rely on Arm, they have an incredibly dominant position within the marketplace and their profit margins are described as ‘impossible’.

Nvidia currently pay to use ARM technology but Nvidia and SoftBank Group recently announced a definitive agreement under which Nvidia will acquire ARM in a transaction valued at $40 billion. The combination brings together Nvidia’s leading Artificial Intelligence (AI) computing platform and Arm’s vast ecosystem to create the premier computing company for the age of artificial intelligence, accelerating innovation and expanding into large, high-growth markets.

Nvidia built their name by designing Graphics Processing Units (GPUs). Laptops and many other devices have both CPUs and GPUs. The GPU handles all the visual components and feeds off the processing power of the CPU. The two elements work in perfect harmony and could power the next generation of devices requiring AI. Moore's Law, which refers to the perception that the number of transistors on a microchip doubles every two years, will soon break down as transistors are already atomic in size and simply cannot develop any further. The way to enhance processing power in the future is to augment the power of the CPUs which will hinge on AI and machine learning.

Arm is based in Cambridge and when they were taken over by the SoftBank Group, legally binding agreements had to be adhered to, maintaining the head office in Cambridge and the remarkable team of experts that drive development. It’s not yet clear how things will pan out with the sale to Nvidia, but similar terms and assurances are needed to keep our most successful tech company on home turf.

Invidia have outlined that they want to keep the research and development presence in Cambridge, turning it into an AI research and education centre, building Arm/Nvidia powered AI super computers to power their research. Nvidia are trying to get to the front of the queue with the use of data and this collaboration could mean significant growth for them and for the evolution of computers worldwide. Imagine how potent the combination of two super-powers with their own revolutionary and outstanding technology could be in terms of AI and machine learning.

So, what’s the downside? Nvidia, a customer of Arm, will own Arm and they’ll have all the technology at their fingertips straight away. What will this mean for other customers? By internalising Arm, Nvidia may become the only company that can make devices as everyone else will be so far behind. Their rivals must be terrified right now. The Chinese are panicked and aren’t holding back in expressing their thoughts on a US company owning Arm. ‘The possibility that Arm could be politicised as a US technology weapon against China’s technology companies must be taken seriously’ warns the Global Times.

The British are also worried about losing the key asset that Arm represents, along with the 3000 jobs and the site in Cambridge, although Nvidia have said that they can’t replicate the community of scientists based in Cambridge that feed off the universities. The UK doesn’t stand out as a leading player in many sectors but in this industry and thanks to Arm, we are seriously accomplished and it’s vital that we keep the base in the UK. This sentiment is strong and is echoed by the co-founder of Arm, Hermann Hauser, who has set up savearm.co.uk where you can co-sign an open letter to the Prime Minister to stop the sale to Nvidia.

Perhaps Arm should remain ‘neutral’, rather than be owned by a company like Nvidia, which produces its own processors. Once Arm is owned by an American firm, Washington may try to block Chinese companies from using its knowhow as part of a wider trade clash between the countries with the ultimate decision on exportation being made in the White House and not in Downing Street.

There are clearly pros and cons and it may be difficult for the UK government to step in, but the sale of Arm to Nvidia needs careful consideration and caveats to protect a great British asset. 

QUIZ QUESTION: What percentage of the global population do Arm technologies reach?

LAST WEEK'S ANSWER: Over 300 languages are spoken in London