LONDON -- SoftBank Group's decision to sell its U.K. chip designer Arm Holdings has cast a shadow over the U.K. economy's already-bleak prospects after the country left the European Union. There are growing concerns that the purchase of Arm by U.S. chipmaker Nvidia may see jobs depart.
The BBC calls Arm the "crown jewel" of the U.K. technology sector, as the company's chip designs are used in more than 90% of the world's smartphones.
Nvidia is buying Arm for as much as $40 billion, compared with the $31 billion SoftBank paid in 2016.
"We recognize the vital role Arm plays in the UK's tech sector, and its significant contribution to our economy," a spokesperson for Prime Minister Boris Johnson said Monday. "We will be scrutinizing it in close detail, including exactly what it means for the Cambridge HQ."
Tom Tugendhat, chairman of the Foreign Affairs Committee, also expressed concerns. "The sale of Arm raises questions of sovereignty. Control of tech is an essential element of [British] independence and [the] U.K. Parliament will have no say on the Committee on Foreign Investment in the United States (CFIUS) decisions that go to the U.S. President alone," he tweeted the same day.
When SoftBank acquired Arm in 2016, Chairman and President Masayoshi Son pledged to double the size of Arm's U.K. workforce over the next five years. He tried to take Arm private so that the Japanese parent company could nurture its technology without pressure from investors for quick returns. SoftBank did double the number of U.K.-based engineers to 3,000.
But there are fears in the U.K. that the promise may not be fulfilled if Arm becomes a unit of Nvidia. If Arm's operations were moved to California, where Nvidia is headquartered, local jobs could disappear. The opposition Labour Party argues the government should intervene to protect British jobs.
Jensen Huang, Nvidia's founder and CEO, tried to dispel the concerns. "Arm will remain headquartered in Cambridge. We will expand on this great site and build a world-class AI research facility, supporting developments in health care, life sciences, robotics, self-driving cars and other fields," Huang said. But the Financial Times noted that those pledges do not amount to legally binding assurances enforceable by the Takeover Panel.
Talks between the U.K. and the EU over a free trade agreement have stalled. If the negotiations fail and tariffs are reimposed next year, it will have a profound effect on the U.K. economy, which has already been hit hard by the novel coronavirus. The U.K. government will not want to see Arm to move its headquarters to the U.S., as that would tarnish its image.
Nvidia's purchase of Arm is subject to approval from the U.S., the U.K. and other countries. Nvidia said it is confident it will get approval from relevant countries, but there are no guarantees. Tugendhat has urged the U.K. government to rethink its China-dependent policy in relation to the removal of Chinese telecom equipment maker Huawei Technologies from its 5G networks.
The U.K. aims to strengthen its tech sector to attract foreign capital and shore up economic growth after Brexit. Cambridge, home to the renowned university of the same name and much brain power, is a symbol of that effort. But if the U.K. blocks Nvidia's purchase of Arm, foreign companies may become less keen on investing in the country.
The government must weigh that risk against Arm's possible departure, which would add to headaches of Downing Street, which is already struggling to come to terms with a post-EU future.