The government must stop Arm’s ‘pass the parcel’ treatment and invest

The writer is Conservative MP for Tonbridge and Malling and chair of the Foreign Affairs Select Committee

In a demonstration of openness after the Brexit referendum, a government keen to show the world that Britain really was going global waved through the sale of our largest technology company — Arm Holdings — to the Japanese firm SoftBank.

The sale was intended to give a long-term home to the UK’s only high technology leader — a world leader in microprocessor technology, which designs software and semiconductors for an array of devices — including defence. SoftBank would ensure Arm’s innovation capability and skilled research base would be secure.

But two crucial things were then unknown. First, was the key role Arm’s capabilities would come to play in protecting national security and global competitiveness at a time of intensified geopolitical tension. Second, was that SoftBank itself would become so over-extended. Less than four years later, Arm would become expendable, opening up an onward sale to US chip company, Nvidia.

This time, the risk to both national security and competition was not missed. Now February’s $40bn Nvidia deal has collapsed, a financial blue moon has occurred. The government can, and should, look again at holding on to a company that is so crucial to Britain’s future.

SoftBank now wants to take Arm public, this time in America. Despite a vigorous lobbying campaign by the government, the London Stock Exchange and the investment community to persuade SoftBank to choose London for its primary listing, the US Nasdaq looks more likely, given its technology focus and deeper pools of capital.

Capital isn’t the only factor though. The war in Ukraine, Taiwan’s chip delays and China’s plan for silicon sovereignty make national security a key part of technological leadership. These decisions are too important to be left in the hands of a foreign owner, especially given the way Arm has been treated.

The recent, last-ditch efforts by Boris Johnson, the prime minister, to lobby SoftBank to choose London were welcome, but it is far too late for timid half-measures. In the interests of national security, and the science and technology base on which so much of our economic strength rests, we need a far bolder longer-term strategy.

The government should now try to buy a golden share to ensure Britain’s interests are safeguarded. We could also promise to buy a 25.1 per cent stake in Arm Holdings at the market price to facilitate, support and, if necessary, compel a London-based IPO. This would secure Arm’s future and end years of debilitating “pass the parcel” treatment.

This wouldn’t come out of the blue. The principle of providing strategic support to technology companies was established with the government’s $500mn investment last year to secure the future of satellite company OneWeb. UK Government Investments has both the mandate and the competence to be the long-term owner of the Arm stake.

As the anchor shareholder, the government could then attract other, private sector UK investors to a London based IPO. Unlike SoftBank’s post-IPO residual stake, the government’s interest would be held for the very long-term, creating reinvestment opportunities for long-term horizon investors.

Our government would not, and should not, seek to control Arm or its day to day activities, but rather to ensure that the company will be operated with a view to ensuring our scientific innovation capability in this crucial global industry. We all have skin in this game.

Protecting our own interests is not a rejection of free enterprise but a recognition that the world is changing. Providing the security and stability Arm needs to invest for the long term, and protecting its ideas, are matters of vital national interest. The government should act — now.

Source: Financial Times