Science & Tech 16 September 2020 The sale of Arm is a test case for silicon nationalism in the UK Dominic Cummings wants to create a British tech company that could rival the Silicon Valley giants. So why is the government turning downing the chance to rehome a firm that does just that? Justin Sullivan/Getty Images Sign UpGet the New Statesman's Morning Call email. Sign-up In early September, Dominic Cummings revealed to colleagues that he was exploring plans to scale up Britain's technology industry. "[We are looking at] ways we can build [$1trn] tech companies", the Downing Street adviser wrote in an email, as reported by Business Insider. The government, according to the Times, is so committed to investing in the tech sector that it might be willing to accept a no-deal Brexit in order to unshackle itself from EU state aid rules. Why, then, less than a fortnight after Cummings' ambitious missive, is the government now passing up the chance to rehome a company once described as the jewel in Britain's tech crown? It was announced on 14 September that Nvidia, a US chip manufacturer, has struck a deal to buy the Cambridge-based chip-design company Arm from SoftBank, a Japanese venture capital firm, for $40bn. Arm's principal product is the world's most popular chip architecture, which has been used to make more than 130 billion computer processors. Its technology is used in more than 95 per cent of the world's smartphones. A government spokesperson previously told NS Tech that it could hypothetically block the takeover, but a senior Whitehall source told the BBC on 14 September that it would not do so (although it may attach terms). One source reportedly said that any attempt to block the sale would be "four years too late as it's SoftBank's to sell". Arm's co-founder, Hermann Hauser – now one of Europe's most high-profile investors – is incensed by the deal. The risks associated with a US firm acquiring a company that is already foreign-owned might seem small, but Hauser believes the deal would be a "disaster for Cambridge, the UK and Europe". The veteran entrepreneur is most concerned about the impact of the deal on the the UK's economic sovereignty. In an open letter to the Prime Minister published on 14 September, Hauser warned that "a sale to Nvidia will mean that ARM becomes subject to the US OFAC regulations”. These regulations could be exploited by a protectionist US, Hauser fears, to prevent the "hundreds" of UK electronics companies that rely on Arm's technology from selling their products in other countries – most notably China, the world's largest consumer market, or any other overseas market with which the Trump administration disagrees. The decisions about who British technology companies can export to “will be made in the White House and not in Downing Street", Hauser wrote. See also: Oscar Williams on why banning Huawei carries its own security risks This isn't a hypothetical threat. In May, as the Trump administration intensified its trade war with China, it closed a loop which meant that although Huawei had been banned from buying American chips, it could still procure semiconductors that had been manufactured outside the US using American software. The move had been orchestrated to hit Huawei's hardware business, although Donald Trump's critics fear that by making the Chinese tech giant more self-sufficient, it will ultimately strengthen the company. Hauser believes the Arm sale will have the opposite effect on the UK. "Sovereignty used to be mainly a geographic issue, but now economic sovereignty is equally important," Hauser's letter reads. "Surrendering [the] UK’s most powerful trade weapon to the US is making Britain a US vassal state." The investor's wording appears chosen to appeal directly to Cummings. In the Times' report from earlier this month, Downing Street was said to fear that if the UK fails to develop large tech firms, "it will end up a technological vassal – reliant on either the United States or China". Hauser wants the UK to intervene in the deal by encouraging SoftBank to take the company public on British soil once again. "As you have spent [$]500m to help [the low-earth orbit satellite manufacturer] OneWeb out of Chapter 11 [bankruptcy], which arguably is not as important to Britain as Arm, you could spend £1-2bn as the anchor investor for an IPO on the London Stock Exchange and get a Golden Share for it so that this problem cannot happen again," Hauser writes. "An IPO was always the declared route to liquidity for SoftBank." Such a move would be welcomed by many in Britain's tech industry. But it would also signal the UK's growing appetite for an emerging brand of silicon nationalism that has already swept across the US, Russia and China. A protectionist desire to exert control over tech firms and their infrastructure, from AI chips and satellite networks to telecoms equipment and social media apps, threatens to accelerate the demise of globalisation and to fracture an industry that was once expected to bring the world closer together. The Chinese tech giant Huawei might be the most high-profile target so far. But Trump's efforts to force China's ByteDance to sell the social media network TikTok's US business to an American company, and Beijing's so far successful efforts to prevent the sale, mark the latest developments of the same trend. Cummings is likely to sympathise with Hauser's concerns. After all, he is reportedly "obsessed" by Arm. Yet the government seemingly has no plans to intervene in the deal. The financial and legal complications of doing so may be enough to deter ministers and officials. Some fear that such a move could also frustrate attempts to strike a US-UK trade deal after Brexit, although Hauser contends that retaining Arm would give Britain the upper hand in such negotiations. Ultimately, a no-deal Brexit might – as Cummings envisages – permit the government to pump cash into the tech industry in an effort to create firms that lead the world in their sector. But, in the case of Arm, the government looks set to let go of a company that already does. See also: Oscar Williams on whether TikTok is really as much of a security threat as Huawei › How Covid-19 is still confounding doctors after six months Oscar Williams is the editor of the New Statesman's technology site, NS Tech. Subscribe For more great writing from our award-winning journalists subscribe for just £1 per month!