ARM: Foreign Acquisition

– in the House of Commons at 10:59 pm on 21st September 2020.

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Motion made, and Question proposed, That this House do now adjourn.—(David T. C. Davies.)

Photo of Daniel Zeichner Daniel Zeichner Shadow Minister (Environment, Food and Rural Affairs) 11:48 pm, 21st September 2020

Earlier this evening, BBC Look East reported that this was a debate worth waiting up for, so we surely must not disappoint. I am very grateful for the opportunity to raise an issue vital to my constituency, but also important for the future of the wider UK economy. I declare at the outset that I am a member of Unite the union, and I am very grateful to it for giving me the opportunity to hear directly from members employed at the company.

This urgently needed debate is to secure answers on the future of one of the UK’s most successful tech companies, ARM, which is based in my constituency. It was confirmed last Monday that it was being sold to the American tech firm Nvidia. Since it was founded in 1990 in Cambridge, ARM has become one of the UK’s best home-grown technology success stories, with huge global reach. It now designs and licenses the basic blueprints of chips used in around 90% of the world’s smartphones, as well as countless sensors, smart devices and cloud devices. Hundreds of global companies license its designs, including Apple, Samsung, Huawei and Qualcomm, putting the UK firmly at the centre of global technological development. ARM employs around 2,700 people in the UK, many in highly skilled, high-tech jobs. They work in its headquarters in Cambridge and across the country in Belfast, Manchester and Warwick.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

First, I congratulate the hon. Gentleman on securing this Adjournment debate. I share his concern, as I have a number of high-tech and modern manufacturing companies in my constituency. Does he agree that the proposed sale will be against the national interest and the UK’s ambitions to be a European technological powerhouse? It is important for us in the UK to look after our own.

Photo of Daniel Zeichner Daniel Zeichner Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman anticipates my arguments, because there can be little doubt that this home-grown tech star is a great national asset for the country. Back in 2016, alongside many in Cambridge and across the UK tech sector, I was hugely disappointed to see ARM sold to the Japanese conglomerate SoftBank. I warned then that we were losing control of this important national asset, and I fear we are now seeing that warning borne out.

ARM’s sell-off in 2016 was backed by this Government with conditions that its headquarters would stay in Cambridge and its staff would be maintained, and so far that guarantee has been honoured, but we are now faced with a new situation with the news of the sale last Monday. Back in 2016, the then Chancellor, Philip Hammond, considered it so significant that he announced the deal personally and legally binding guarantees enforceable by the Takeover Panel were secured. This time there has been silence from Government—a silence that I hope will be broken this evening. Although I recognise the sensitivities around commercial confidentiality, the same applied back in 2016. We need to know what the Government’s view is on the transfer of a key UK- based technology giant, particularly in such uncertain times.

Photo of Darren Jones Darren Jones Chair, Business, Energy and Industrial Strategy Committee, Chair, Business, Energy and Industrial Strategy Committee

I thank my hon. Friend for securing this important debate. Does he agree with me that in assessing the risks of the takeover bid, we need to understand the possible repercussions for British jobs and industry if trade sanctions are put in place by President Trump, for example, as the Nvidia parent company is based in the United States?

Photo of Daniel Zeichner Daniel Zeichner Shadow Minister (Environment, Food and Rural Affairs)

I thank my hon. Friend the Chair of the Business, Energy and Industrial Strategy Committee. He makes an important point that I will come on to, but I return to the Government’s position, because I find their silence slightly ominous. It has only been breached by briefings to selected journalists and, frankly, that does not seem good enough to me.

It would be astonishing if this Government, with all their talk of world-beating test systems and taking back control, considered allowing us to lose further control of one of the only areas of technology in which we are genuinely world-beating and world-leading. It is particularly astonishing that the Government might be prepared to throw away British influence when it represents such a key bargaining chip in trade talks in a post-Brexit era. I do not think any other country in the world would allow such a jewel in the tech crown to be handed over in this way, so I urge the Government to scrutinise the deal carefully and to step in and use powers available to them to impose strict, legally binding conditions.

The sale raises a range of questions and issues of local, national and international significance. I have been raising them for many weeks now, as have trade unions and the co-founders of ARM. We have received little substantial response from Government, although I was pleased to have a direct discussion with Nvidia today. I invite the Minister to provide some answers from the Government’s perspective.

Since the announcement, Nvidia has made promises to keep ARM based in Cambridge, to hire more staff and to retain ARM’s brand, but without any legal guarantees, I fear those remain just promises—doubtless genuinely made—not guarantees. Will the Minister confirm whether the Government are seeking legal assurances in this deal to ensure that ARM’s headquarters remain in Cambridge and it retains the some 2,700 jobs it supports in my constituency and across the country? I am sure the Minister will say that it is hardly likely that Nvidia would ditch highly sought-after engineers, but members of Unite have told me that many jobs, particularly in IT, are much more vulnerable. Similarly, I am told that some 300 people in Cambridge work on graphics processors, an area in which Nvidia works. It could be a perfect match, or it could mean rationalisation and job cuts.

There is little sign of much meaningful consultation with those who work for the company. Having followed the media commentary, it has struck me that those who work for ARM hardly seem to have a voice—a doleful consequence, I fear, of a largely non-unionised workforce. The money may be good, but when it comes to times such as this, the value of having professional negotiators acting on one’s behalf becomes apparent. I am grateful for the strong interventions from not only Unite but Prospect, which also has members at ARM. I have a further question: will the Minister confirm that Cambridge will continue to be the company HQ and explain how promises will be enforced? Anyone can make promises, but will they be kept? How will they be enforced? The deal will affect jobs not just now but in the future, and could have serious ramifications.

ARM’s current business model has been highly successful. It is based on remaining neutral in the tech market and licensing chip designs to any chip maker that wants them. ARM’s co-founder Hermann Hauser has warned that although SoftBank was able to maintain ARM’s neutrality, Nvidia is different: it is a chip maker itself, so companies using ARM will now find themselves as competitors with its parent company. Some could start to seek alternatives. Nvidia has said that it will maintain ARM’s neutrality, but we have no legal assurances. Will the Government be seeking assurances that ARM’s unique business model—and so its success—will be secured?

The sale has implications both internationally and diplomatically. If ARM becomes a subsidiary of the American company Nvidia, we will in effect be handing over control to the current US Government, as it could become subject to their foreign investment regulatory committee, the Committee on Foreign Investment in the United States. The Trump Administration will then ultimately hold the reins over which countries use the technology—which is used in almost all mobile phone chips in the world—and where it will be possible to export it.

It is quite clear that Trump has no qualms about interfering in the operations of tech companies to pursue his own foreign policy goals. Chinese tech companies have already voiced concerns that American ownership of ARM could jeopardise access to ARM technologies for their businesses. Some may not be bothered about that, but it highlights the real role that this UK-located tech giant plays in the international struggle for technological sovereignty.

We need guarantees that ARM is not going to be embroiled in American trade wars and that decisions over this key technology are not completely lost to us. As the Chair of the Foreign Affairs Committee said:

“The sale of @Arm raises questions of sovereignty. Control of tech is an essential element of independence and @UKParliament will have no say on the CFIUS decisions that go to the US President alone.”

I agree. To safeguard the UK’s interests, we need clear conditions on the takeover to exempt ARM’s tech from intrusive US regulations.

The takeover comes more than a year after the Government’s telecoms supply chain review report, in which the Government committed to diversifying the UK telecommunication supply chain. Since then, a plan to do just that has repeatedly been promised and repeatedly been delayed. Will the Minister explain just how selling this UK-headquartered, world-leading telecoms supplier to a competitor supports the diversification of the supply chain?

I understand that the Government say they are looking into the takeover and that Ministers are considering whether to refer it to the Competition and Markets Authority. I also appreciate that Government policy is in a state of flux, with a pattern of tech businesses being taken over, the status of the industrial strategy unclear, and the national security and investment Bill yet to be published, so we have to use what we have. The Government have the power to impose conditions on such takeovers if they threaten national security or financial stability, which the selling of ARM to Nvidia clearly does.

I appreciate that the Minister who will respond to this debate is the Minister for Digital and Culture, not a Minister from the Department for Business, Energy and Industrial Strategy or the Minister for Security—that serves to highlight the complexity of the issue. Last time, the Chancellor took ownership; we need the same again. We need a coherent, cross-Government response, led from the top. I urge the Minister to consider such issues carefully, make the case to her colleagues and wake up to the threat that the deal poses unless strict, legally binding conditions are applied.

In conclusion, will the Minister confirm today whether it is the Government’s intention to refer the takeover to the Competition and Markets Authority? Do the Government intend to place clear conditions on the deal to guarantee that ARM’s HQ will stay in Cambridge; that jobs will be protected; that its unique business model will be secured; and that its technology will not be a lever in future trade negotiations that this Government have handed to our competitors?

Photo of Lindsay Hoyle Lindsay Hoyle Speaker of the House of Commons, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee on the Electoral Commission

Order. It is a half-hour debate. I have not been told that you wish to speak and I am not sure whether the person who is holding the debate has either. You can intervene, but I have not been given notice of anybody else. Have you been told, Daniel Zeichner?

Photo of Andrew Griffith Andrew Griffith Conservative, Arundel and South Downs 12:00 pm, 21st September 2020

Thank you, Mr Speaker. I thank the Minister and I congratulate Daniel Zeichner on securing this debate on a subject that is important to his constituents and to all of us. I also congratulate everybody associated with ARM, which is a great British success story of the type that we need more of in this country.

I am an optimist and I believe that ARM will prosper under its new ownership. Nvidia is an exciting company that works on some of the cutting-edge technologies that ARM has excelled in. I hope it will open the world to more opportunities. I welcome, as the hon. Gentleman has, the commitments that have been given to maintain a presence in Cambridge and to build an artificial intelligence centre there.

I also hope that the new owners will enjoy the benefits of operating in the United Kingdom with our adherence to the rule of law and to the English language and the pro-enterprise environment. ARM will also greatly benefit from the Government’s commitment to double investment in science, which is a point of alignment on both sides of the House.

I beg to differ with the hon. Gentleman on the two things that I think businesses such as ARM need to prosper and thrive. The first is certainty, which is rarely aided when the Government get involved. As the hon. Gentleman will know, ARM made 24 acquisitions to get the business to the place it is in today. If the Government had intervened on those acquisitions, perhaps it would not have been so successful.

Secondly, businesses need access to capital, which used to be one of the great strengths of the United Kingdom. We had a vibrant new listings market that the Hermann Hausers of tomorrow would be looking to. Another unforeseen effect of the Government making an intervention would be that our capital markets would become less attractive, less competitive and less able to foster the ARMs of the future, which is what the Government should seek to do to create the jobs, opportunity and prosperity that the country will need.

Photo of Caroline Dinenage Caroline Dinenage Minister of State 12:02 pm, 21st September 2020

I start by thanking Daniel Zeichner for securing this debate on an important matter, to which he is right to bring the attention of the House. His constituency is a vital part of our nation’s tech environment, and I fully understand that many of his constituents’ jobs are in the sector.

The Government are incredibly passionate about protecting a vibrant, successful and growing tech sector in the UK, and about remaining at the cutting edge of innovation. A key part of that is the design of microprocessors, which are crucial for building reliable and predictable chips for worldwide customers. ARM is at the heart of that semiconductor ecosystem. As one of the largest tech companies in Europe, it is hard to overstate ARM’s significance to the wider sector, as the hon. Gentleman articulated beautifully. It has massive potential to give our country an advantage in a wide range of sectors and technologies.

The Government closely monitor all acquisitions and mergers. When a takeover may have a significant impact on the UK, we will not hesitate to investigate further and take appropriate action. In this case, we are working hard to understand the full impact of the move and the potential impact it may have on the future. From there, we are able to consider what steps we may wish to take.

Photo of Caroline Dinenage Caroline Dinenage Minister of State

I will in a moment. I will make a bit of progress, then I will be happy to take the hon. Gentleman’s questions.

The Enterprise Act 2002 allows the Government to call in transactions on four public interest grounds: financial stability, national security, media plurality and public health emergencies. When a Secretary of State decides to intervene under the Act, they declare a public interest intervention notice. That triggers a deadline for the Competition and Markets Authority to conduct what it calls a phase 1 investigation. The CMA will then engage with the parties while it gathers the information and publishes an invitation to comment notice. That invites views from the merger parties and other interested third parties on the transaction under review. At the end of that phase 1 stage, the Secretary of State can: clear the merger, clear the merger with undertakings, or refer the merger to a phase 2 investigation. At the conclusion of the phase 2 investigation, the Secretary of State would consider if the transaction meets the threshold for intervention on public interest grounds under the Enterprise Act, and therefore make a decision on the necessary steps if and when it would be appropriate to do so.

The reason I am explaining that to the hon. Gentleman is that I think it is really important to articulate the number of very careful steps we would have to take in that process. In this instance, the Secretary of State for Department for Digital, Culture, Media and Sport would be the final decision maker. It is obviously extremely critical that he does so with an independent mind, having received all the relevant information and without prejudice. I am sure he will understand that while I am very happy to stand at the Dispatch Box and answer as many of his questions as possible, I have to be very careful not to say anything that could in any way prejudice that decision or any future moves. However, I will try to answer as many of his questions as I can.

As the hon. Gentleman will know, on Monday 14 September Nvidia and Softbank Group announced a definitive agreement under which Nvidia will acquire ARM Limited from Softbank in a transaction valued at $40 billion. The announcement stated that Softbank will remain committed to ARM’s long-term success through its ownership stake in Nvidia, which is expected to be under 10%. Furthermore, the statement said that ARM will remain headquartered in Cambridge. Nvidia and Softbank have made statements to the media expressing their commitment to maintaining ARM as a successful business in the UK. They have suggested that they will build on ARM’s R&D presence here by establishing a global centre of excellence and will create a platform for global innovation with industry partners across multiple fields. We will consider all those statements incredibly carefully.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Human Rights), Shadow DUP Spokesperson (Health)

Yesterday’s papers suggested that last year ARM paid some £268 million in tax and that it has the potential to be Britain’s first trillion dollar company. Has the Minister had any assurances from the company about its commitment to keeping its tax base here, and thereby the tax it pays to Her Majesty’s Revenue and Customs her as well?

Photo of Caroline Dinenage Caroline Dinenage Minister of State

We have had conversations with the company at various points over recent months. However, I do not want to prejudice the situation in any way, shape or form, so I do not really want to discuss any of its commercial aspects, if the hon. Gentleman will forgive me.

Photo of Darren Jones Darren Jones Chair, Business, Energy and Industrial Strategy Committee, Chair, Business, Energy and Industrial Strategy Committee

As a point of factual clarification, could the Minister confirm whether the impact of US trade sanctions is considered in the process that she set out with the CMA?

Photo of Caroline Dinenage Caroline Dinenage Minister of State

I think that that would depend on which aspect, of the four that are under consideration, the Secretary of State was looking at.

As the hon. Member for Cambridge and others know, the UK is a global leader in tech, with a proud history of innovation and invention. Our world-leading universities, financial sector and regulatory environment have produced pioneering researchers, scientific institutions and research projects, and the UK tech sector has the world’s highest proportion of overseas customers, driving our ability to forge global partnerships and attract the very best talent from around the world. From artificial intelligence to biotechnology, the UK has made huge breakthroughs, generating more billion-dollar tech firms than any other country in Europe. Nationally, we now have 82 companies that are worth more than $1 billion—more than France, Germany and the Netherlands combined.

We will, of course, continue to invest in science and technology and R&D-intensive emerging sectors such as artificial intelligence, quantum technologies and robotics. We will also continue to promote the UK as the very best place to start and grow a tech business. We have the skills, the location and the language, alongside a business-friendly environment, strong access to finance and a long-standing reputation for innovation.

Photo of Daniel Zeichner Daniel Zeichner Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to the Minister for taking a further intervention. I just want to clarify who the Government have been talking to. She said that there have been conversations with the company—is that ARM or Nvidia? It is a key difference. I understand the point she makes about the sensitivities, but the same was true in 2016, and it was possible then for the Government to secure guarantees. Why not now?

Photo of Caroline Dinenage Caroline Dinenage Minister of State

Ministers and officials have spoken to various parties in recent days, and we will continue to do so as we seek to understand the full implications of this transaction from every angle.

The hon. Gentleman will know how diverse our tech sector is in the UK. I know that Cambridge has a greater proportion of people in tech than any other city in the UK besides Belfast, so I fully appreciate the worry that this causes for him and his constituents. Well over 2,000 people are based in ARM’s Cambridge headquarters, and we are determined to see that continue. I thank him for his continued interest. I am sorry that I have not been able to answer all his questions as fully as he would have liked me to or as I would have liked to, but I promise that I will keep him closely abreast of this issue as it develops.

Question put and agreed to.

House adjourned.