On the day of the IPO announcement, BBC news headlines trumpeted the regulation of health service managers, the indictment of former president Donald Trump, Japan’s decision to release Fukushima nuclear waste into the Pacific — and a profile of an Edinburgh Festival comedian. News about the most successful British tech company of all time, Arm, preparing to list on New York’s Nasdaq stock exchange was relegated to the bottom of the business news.
What a misjudgment. Arm’s decision to list in the US merits front-page headlines. It represents a major blow to the UK’s ambition to transform Britain into a “technology powerhouse.” Prime Minister Rishi Sunak was reported to have met the Arm CEO at Downing Street in a failed bid to persuade him to change his mind.
In contrast to the BBC’s oversight, the US media seized on the news enthusiastically, with CNBC calling the Arm IPO “a big deal for the market” — the first major tech IPO in two years. Arm’s US listing will be key to achieving Washington’s goal of slowing down China’s semiconductor progress. As a New York-listed company, Arm will now come under US security rules, which are much stricter than the UK’s live and let-live approach.
Arm designs the world’s most energy-efficient processors. It licenses intellectual property to smartphone chip makers and was a crucial element in Apple’s ability to create the iPhone. “About 70% of the world’s population use Arm-based technology,” according to Arm’s own website. Based in the university town of Cambridge, Arm stands at the heart of the successful Cambridge tech ecosystem.
And yet, the British government allowed Japan’s Softbank to buy Arm in 2016. No US administration would have permitted Google, Apple, or Intel to be sold to an overseas entity. British indifference can only be explained by its political class’ ignorance about the strategic importance of technology. Former Prime Minister Theresa May infamously hailed the loss of Arm as a victory demonstrating how Britain is “open for business.”
How naïve. UK regulation has failed to catch up with how the tech world is being reshaped. Instead of supporting a strong UK tech ecosystem, ill-informed government ministers prioritize low prices for consumers. British tech mistakes are legion. Just two of many examples are how Brexit pulled Britain out of the EU Horizon science program and worsened tech skills shortages.
The Biden Administration would never make such mistakes. It is laser-focused on technology’s strategic importance. Witness its pathbreaking, powerful support in the Chips Act of bringing home semiconductor production and simultaneously boosting R&D.
Arm itself faces considerable challenges. More than 20% of its revenue comes from a China subsidiary that it no longer controls — and which will suddenly become subject to strict US export controls.
Some analysts fear Arm is being overvalued. Softbank is hoping for $70 billion for just a 10% stake. Not long ago, AI chipmaker NVIDIA proposed buying the whole company for $40 billion. What has Softbank done to make Arm worth so much more?
If the IPO fails, or if Softbank is forced to offload shares at a low price to solve its financial difficulties, a strategic investor acceptable to regulators might need to intervene. How about a tech giant with deep pockets that do not compete directly with semiconductor companies? Apple springs to mind. It is both a major customer and was involved in Arm’s creation.
Arm’s future growth is likely to come from the automotive market, data centres, and artificial intelligence, all critical infrastructure. Arm’s R&D may remain in Cambridge, but the strategic decisions will be made in the US — where the threat from China to critical infrastructure is understood.
A US listing offers better access to funding and programs originating from DARPA, which dwarf those from its UK counterpart, DASA. Large contracts of the kind awarded to Qualcomm and Intel by the National Security Technology Accelerator (NSTXL), could now come Arm’s way. And with its headquarters under US regulation, Arm is well placed to compete for a share of the $11 billion of R&D funding available under the US Chips Act.
Where does that leave UK tech? CNBC correctly cites British concerns that Arm’s US IPO ‘undermines the UK’s “tech sovereignty.” However, the only tech sovereignty that Britain can achieve is by building a strong partnership with Europe, as espoused by tech entrepreneur and investor Herman Hauser, who helped found Arm
In an alternative, parallel universe, a London-listed Arm could be at the core of a strong, independent European tech ecosystem. But Brexit, Softbank, and government naiveté killed that vision. For now, a US framework best suits Arm and Western supply chain security.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
