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SoftBank, ARM and industrial policy

The acquisition of Arm Holdings by Softbank has very broad ramifications for UK R&D, not least in the absence of a national industrial strategy. By the R&D Society Board

This post was published, in part, in the Financial Times on 26 July 2016 as a letter entitled ‘Arm’s acquisition won’t help our growth strategy

Japan's SoftBank tech investment group has agreed to buy integrated circuit designers and licensers Arm Holdings for £24bn (Japan’s SoftBank buys Arm, Financial Times, July 19). SoftBank is a 25+ year old company which began in software distribution; it embraced tech events and publishing in the 1990s (buying US publisher Ziff-Davis), then the growth of the Internet, partnering with Yahoo! to build Yahoo! Japan; it was involved in the development of broadband in Japan, as well as mobile telecoms and data and, latterly, bought US cellphone service Sprint-Nextel and acquired Japan-based Vodafone K.K. from Vodafone; it has joint ventures with Chinese e-commerce platform Alibaba and investments in the Indian tech sector. (More on the history of ARM and SoftBank in the FT).

SoftBank may want to acquire a company that has a bright future in integrated circuits used in mobile devices, as ARM's strategy promises a better future than for Intel (commentary by Charles Arthur). In part this a move to exploit future potential around the 'Internet of Things' (BBC), or what we used to call ubiquitous or pervasive computing (Guardian). It may also be related to Brexit: according to the FT, SoftBank founder Masayoshi Son told a press conference that Brexit did not affect the decision to buy ARM, while ARM co-founder Hermann Hauser described SoftBank’s proposed takeover as one of the ‘sad and unintended consequences’ of Brexit. On the employment side, SoftBank has committed to ‘at least’ a doubling of ARM’s existing UK workforce (The Register), which may include R&D jobs. Others worry about UK R&D being ‘gutted’.

The acquisition of Arm Holdings by SoftBank has very broad ramifications for UK R&D, as Arm’s activities cut across multiple market ecosystems beyond hardware and electronics, including software and systems, healthcare, engineering, and the developing and future markets around the Internet of Things.

The acquisition of Arm Holdings by SoftBank has very broad ramifications for UK R&D

This development will do nothing to support UK growth strategy, particularly for mid-size firms, and will further weaken the commercialisation environment around science and technology. The effects of such acquisitions can be seen in the 2006 acquisition of another Cambridge-based tech company, TTP Communications Plc, by Motorola, with its subsequent chequered history; and of Cadbury by Kraft, which failed to keep many of the promises it, like SoftBank, made.

And while Cambridge may soon be awash with more multi-millionaire tech entrepreneurs, this acquisition may also encourage more mid-size companies to consider selling-up.

The timing of this acquisition is particularly serious in the absence of a national industrial strategy, which the UK urgently needs, and may now move towards (UK industry welcomes Theresa May’s strategy pledge, Financial Times, July 20). As well as removing barriers to innovation, such a strategy should focus on key market ecosystems – not just pay lip service to the Eight Great Technologies – and the creation and retention of value. It should also emphasise building an environment that facilitates commercialisation – the ‘D’ of ‘R&D’ – and making the UK preeminently ‘open for innovation’.

See related post The bid for Arm Holdings raises questions for shareholders, David Hughes, 04/08/2016

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