Senior Lecturer in Computer Science Dr David Reid discusses the implication of the Government’s proposed takeover of chip designer ARM Holdings.
On Monday, the UK government welcomed the proposed £24.3 billion takeover of chip designer ARM Holdings by the Japanese software company SoftBank saying that it showed ‘Britain was open for business’. This was a complete reversal of the strategy just one week before, when the new Prime Minister vowed to protect British businesses from predatory foreign investors.
This takeover may be the first unintended consequence of Brexit; the resultant fall in sterling made ARM relatively cheap to buy. However, the ramifications of this takeover will last for many years after we leave the EU and go far beyond just affecting the British technology industry. To understand why this takeover is so important, and is more significant that just another business transaction, the wide reaching influence of ARM needs to be emphasised.
ARM is often described as the ‘biggest company you have never heard of’, it doesn’t make chips, but pioneered a radical design that makes them incredibly power efficient. ARM Holdings owns the Reduced Instruction Set Computer (RISC) architecture on how to do this and licenses it to other companies to build the chips. This strategy has been phenomenally successful, ARM chips power 95 per cent of mobile phones, cars, TVs, tablets and many other devices. It produces 25 times more chips than Intel, around 4.3 billion people - 60 per cent of the world’s population - touch a device carrying an ARM chip every day (to put this in context, only 64 per cent of the world’s population have access to basic sanitation). 51 billion ARM processors have been sold, which is almost seven ARM chips for every person on the planet.
ARM is Britain’s last big high-tech business standing and SoftBank has promised to create 1,500 new jobs in the UK over the next five years. Despite SoftBank’s pledge, if ARM does migrate abroad - or gets wound down - then it will leave a gigantic chasm in the UK’s digital future. Rather than Britain being ‘open for business’ this could be a closing down sale.
In Theresa May’s policy speech last week, she was completely unambiguous and opposed foreign companies buying our strategically important businesses. She cited Cadbury, which was acquired by Kraft of the US, and AstraZeneca, which narrowly escaped takeover by Pfizer. Both would have been blocked by her, she suggested. Yet ARM is far more strategically important than either of these companies. Recent foreign takeovers of British high-tech businesses have had mixed success. Autonomy - taken over by Hewlett Packard in 2011 for £7.4 billion - was a mess, resulting in both sides suing and counter-suing each other, whereas DeepMind - taken over by Google for £400 million - seems to have created a good partnership.
The critical thing here is that in Britain the same thing seems to be happening over and over again. A talented start-up gets a great idea, it successfully grows, whereupon it is promptly taken over by a bigger foreign tech company. There is something about our business environment that doesn’t allow British tech companies to independently grow beyond a certain size. ARM was the exception to this rule.
The age of the Internet of Things (IoT) is rapidly approaching. This is where many smart devices become hooked up to the internet and communicate with each other. IoT is acknowledged by all the experts to be ‘the next big thing’ and ARM chips are uniquely placed to capitalise on this new industry. In a recent McKinsey report, IoT was forecast to be worth $6.2 trillion by 2025 - suddenly the ARM takeover looks like a bargain.
Although SoftBank is acknowledged to be a progressive and ambitious company, it has £86 billion of debt and shares in SoftBank itself have fallen by 10 per cent since the news of the takeover. SoftBank’s 2013 acquisition of France’s Alderbaran robotics company has not gone well. Since 2013, the company has had a succession of CEOs, and in 2014, 25 per cent of the team were laid off. One member of the Aldebaran executive team was recently quoted as saying: “I’ve never seen a company so big with such little organization.”
Access to the ARM architecture for research has also yet to be addressed. The cornerstone of the largest European research project since CERN, the €1.2 billion Human Brain Project (HBP) was launched last year with the ambitious goal of turning the latest knowledge in neuroscience into a supercomputer simulation of the human brain. This is based around modified ARM technology - the SpiNNaker chip. At the other end of the educational scale, the Raspberry Pi used in many schools is also ARM based. SoftBank now own the ARM architecture, and can therefore directly influence research and education by control of both access and price. The recent loss of EU funding for Science and Technology research will not help the research and educational ecosystem, or help development of ARM and other advanced CPU architectures.
For many, the process of the ARM takeover has starkly demonstrated the lack of appreciation for our technological heritage. I fear the strategic and economic future of the UK is being determined by politicians that are oblivious to technology and are ambivalent to experts. It is no longer ok for MPs not to know about technology. Being able to quote phrases in Latin or recite Shakespeare may be great for oratory, but when the same MPs make strategic decisions prefaced by joking about not being very ‘techy’ then I start to worry.
Politicians often have ministerial posts in fields they know little to nothing about. This is particularly true in science and technology. The attitude of ‘we will leave it to the geeks’, and hoping a PPE degree from Oxford is all they need for high office, doesn’t cut it in the 21st-century anymore.
At a more fundamental level, there seems to be a worrying ingrained disconnect between culture and technology in our society. Many argue that culture and technology are two distinct camps. It’s not ok to not know that Shakespeare wrote Macbeth, but it’s perfectly fine to have no idea what CPU in your smartphone is - technology is cheap, so it must be culturally worthless.
Yet think of it this way; the ARM chip you carry in your pocket is the personification of ideas, it’s the tangible crystallisation of scientific thought. Embedded within in it are concepts that can be directly traced back to scientific discoveries made by Newton - the diffraction of light when rendering graphics in the GPU, Leibnitz - the calculation of logarithms in the ALU and FPU, and Aristotle - the logic in the CPU. The ARM Cortex-A73 has approximately five billion transistors and each transistor is 10nm - a sheet of paper is 100000nm thick. They are a marvel of engineering, and are the most complex structures that mankind is capable of building. They have almost infinite utility, and broaden our capacity to create and perform scientific research, we simply could not do without them.
I would argue that throughout mankind’s history, every society has been overwhelming defined, or limited, by the technology it uses. If aliens ever found the Voyager 1 spacecraft, my conjecture is that they could learn more about mankind by the technology the spacecraft used, than in the sounds and images selected to portray the diversity of life and culture on Earth within the golden records it carries.
Because people in charge often undervalue the importance of technology, are we in danger of entering an age of intellectual austerity? It’s all too easy to diminish our ability to innovate because we lose control of innovative technologies. Let us hope the takeover is a success and that whatever happens, we somehow retain the innovative creativity to reinvent the future again.
Sometimes the value of something bears little reflection to its price.