Arm is a Cambridge-based British semiconductor design firm whose blueprints for chips are used to make cars, smartphones, advanced military hardware and more. Its clientele, including Apple, Qualcomm, and Huawei, rely on its core architecture for their chips. Arm is everywhere and has become an integral part of the global technology ecosystem.
Semiconductors are the new oil. It is used in almost all advanced computationally driven technologies, including 5G. But being extremely complex to make, there are few players in the game. Arm’s position as a leader in advanced chip architecture design is the reason why the British Government has intervened this month in its sale to the Californian GPU maker Nvidia.
Semiconductors are pieces of silicon that contain several ‘transistors’, components that allow the flow of current, linked together by a circuit etched into the surface of the silicon. Taiwan’s TSMC is the most advanced and powerful manufacturer on which the US relies for most of its military hardware. This reliance has turned TSMC into a sovereign asset for Taiwan as the US will defend it against Chinese incursions to protect its supply.
But the core architecture, as mentioned above, in a lot of these chips is designed by Arm, making it a uniquely powerful entity in global geopolitics. Soon that may not be the case if its sale to the Californian company Nvidia materialises.
Currently, Japan’s SoftBank owns the firm, but because it is a multinational holding group with stakes in many different industries, its influence and control are largely minimal. However, Nvidia is a business whose products are used in computers, gaming devices and massive data centres where AI is trained. As part of Nvidia, Arm can be controlled more heavily to serve its own needs. Arm could potentially also be forced to dump the clients its master sees as competitors. This restructuring would surely harm Arm’s trusted position as a neutral high-end chip blue-print designer. Most significantly, though, Arm will become part of the Committee on Foreign Investment in the United States (Cfius) and face American regulations.
Arm, a global leader in chip design, is one of the technologies that make Britain relevant to the world. With the City of London potentially never getting the equivalence deal from the EU, allowing it to work in its territory freely like before, advanced tech companies become even more essential for Global Britain’s agenda.
To chart its own course, Britain has to be at the cutting-edge, leaving Europe behind and looking to the future. Boris Johnson is on the right track with plans to invest heavily in science and technology-driven industries of the future like green energy and fintech. However, semiconductor players in Britain have been taken lightly for too long. If the Nvidia sale goes ahead, while the establishment sit back and let the market do its thing, as The Economist suggests it should, Britain will become even more vulnerable and subjected to American whimsy. Global Britain’s reputation depends on its being an indispensable partner, offering something no one else can, and not just to the US.
Relying purely on market forces would undermine Britain’s position, particularly after Brexit. Playing by the market rules means ceding control to the so-called ‘developmental states’ like Japan, South Korea and China, where the state plays a significant role in nurturing and powering local industries. Britain has always been in the opposing category of market economies. However, the developmental state model is not so alien to how Britain has been managed for centuries, as organisations supported by the Government “played central roles in creating and sustaining innovation-based growth in the UK”. Support and a little protection are what Britain needs to secure its local semiconductor firms in a nearly £5 trillion industry.
It is not just about the money; Britain’s military depends on semiconductors too. Modern military equipment devices such as data display systems and aircraft guidance-control assemblies cannot work efficiently without them. As technologies advance rapidly, their dependence on semiconductors will only increase exponentially. The military importance of semiconductors underlines the need to secure supply chains with manufacturers such as TSMC.
Local manufacturers can technically be built, but the exploding costs and rapid advancement of Taiwan’s TSMC and South Korea’s Samsung (the world’s number two producer of semiconductors) mean Britain’s manufacturing will not be good enough, holding back the overall advancement of where its strengths lie. With its world-beating manufacturing ecosystem and over £70 billion investment in the semiconductors industry, even China is bound to fall behind Taiwan and South Korea by five or so years. But the core design being based in Britain means that it is almost just as indispensable to TSMC to the world. Thus, allies will support Britain’s supply chains as long as it remains in this position.
The British Government’s much-awaited intervention in Arm’s sale this month is, therefore, highly welcome. In recognition of Britain’s vulnerabilities and strengths, it should make its verdict according to what kind of future it wants for the country. Dominic Cummings’ dream of turning Britain into a tech powerhouse of the world, standing shoulder to shoulder with the East Asian Tigers while still carrying its grand cultural heritage, is the vision the Government should be working towards turning into reality. The Arm case should inspire the Government to recognise its overlooked success and focus on turning its exception into Global Britain’s norm.
Mehroz is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: RAEng]
