THE DEMISE OF ARM

There has been some recent disquiet about the ongoing ownership changes of ARM Holdings, once a highly successful company and the UK’s only prospect of a tech giant. The company was taken over by the Japanese Softbank Group, since when it has been split apart.

In Turbo Brexit: and the case against Brino, I pointed out:

“A key aspect of Ponzi economics is the ability of the Ponzi class to offload a large part of the costs they run up into a pile of unpaid bills and outstanding debt. Much of this is tucked away out of sight from legitimate scrutiny, not least due to the complicity of the media.

In addition to the financial costs, cultural and social costs, and the looming tax grabs detailed above, there are in addition the unpaid bills. These dwarf the immediate financial costs. To relate Ponzi economics to the costs of Brino, two issues will be examined: the impact of mass immigration and the ongoing trade deficit.”

Regarding the UK’s trade deficit, primarily stemming from trade with the EU and China, in Turbo Brexit: and the case against Brino, I wrote:

“A recent Daily Mail article began: ‘Britain’s world-leading finance industry bring in a £57 billion trade surplus and far outrank any other European nation, a report shows.’ The report was from TheCityUK and gushed that the surplus was greater than Britain’s closest rivals, the USA and Switzerland, combined. London is ‘the top foreign exchange centre on the planet’.

If this wondrous surplus is so fantastic, then how, by comparison, should the £100 billion or so trade deficit with the EU be described? And why is the government refusing to take the opportunity of Brexit to deal with it? The deficit is funded by the never-ending sale of British assets to foreigners. The government is keen for this despite the negative repercussions on the British economy. The best of Britain’s firms are being sold off, with their technology being transferred abroad.

For example, in June 2018, James Anderson, manager of Scottish Mortgage Investment Trust and a highly successful technology investors, blogged: ‘My prevailing belief is that new British companies fail to compete at scale because they deserve to fail, not because they are doomed to do so. To put it more bluntly: they are unsuccessful because they (and we) are unambitious – indeed, unfit for purpose.’ He referred to the number of technology firms sold off to foreigners and highlighted ARM Holdings that he described as ‘Britain’s sole serious shot’ at building a tech giant before it was sold off.

Anderson had just visited the firm Grail at Menlo Park in California. Grail was developing blood tests to detect cancer using genetic data. Grail had been syphoned off from Illumina, which had bought up the Cambridge firm Solexa. Solexa had been started by Cambridge University scientists and had originally pioneered the genetic testing that Illumina had proceeded to exploit. Anderson wrote: ‘Next generation genomic sequencing was literally invented in a pub in Cambridge. This could – should – have been a British success story based not in Menlo Park but in Cambridge.’

In June 2018, a division of ARM Holdings was sold by the Japanese firm Softbank (who had recently bought ARM) to a Chinese state-backed consortium. The division sold accounted for roughly 20 per cent of ARM’s sales and the sale gave China better access to ARM technology. Softbank refused to explain why the division, estimated to be worth £5 billion (according to Reuters), was sold for only £580 million. The deal was seen as part of China’s ‘Made in China 2025’ strategy to decrease dependence on imports. Softbank said that in the region of 95 per cent of all advanced chips designed in China the previous year were based on ARM technology.

Both the EU and the USA have objected to China’s rules regarding the importing and exporting of technology. China demands joint ventures for inward investment and so gains access to technology, and places restrictions on the export of technology. In June 2018, the EU began legal proceedings at the WTO about these matters. EU trade commissioner, Cecilia Malmstrom, said, ‘This is against international rules that we have all agreed upon in the WTO. If the main players don’t stick to the rule book, the whole system might collapse.’ President Trump also accused the Chinese of using joint ventures to force companies to hand over technology.

Rene Haas, president of ARM’s intellectual property group, said: ‘The partners in China are still using the very same technology they were using prior to the JV [joint venture] being established. If you are a local partner, the biggest change is that you are now operating on a PRC [Chinese] contract as opposed to a UK contract.’ That, of course, is the problem.”