Brussels should intervene and block the acquisition of Britain’s tech jewel ARM by U.S. chip giant Nvidia, according to Peter Mandelson, a former EU trade commissioner and former U.K. business minister.
Mandelson argued that Brexit should play no role in the EU’s calculus and sent a letter to European Commission President Ursula von der Leyen in which he mapped out what he saw as the broader strategic importance of keeping ARM within a European commercial eco-system.
“ARM is a major European asset, the question of its future ownership is of utmost importance to … Europe’s industrial policy,” Mandelson told POLITICO in an interview.
“The only people who have the ability and the political will to stand up against this acquisition on competition grounds are in Europe,” he said. “Brexit is completely irrelevant, it transcends Brexit. It’s a question of Europe’s technological sovereignty, not just Britain.”
Mandelson, who was one of the big hitters in the British Labour Party, is now chairman of a consulting company, but insisted he wrote to von der Leyen in a personal capacity and that he had no stakes in the deal.
Nvidia last month said it is offering $40 billion to acquire ARM, a U.K.-based chip designer that licenses more than 500 companies with the designs of chips embedded in billions of processors. These companies include U.S. tech giants like Intel, Qualcomm, Apple and Nvidia, but also European chip-makers such as STMicroelectronics and NXP Semiconductors.
It is unclear whether competition authorities will investigate the deal, but Europe’s probe would be of particular importance, according to Mandelson.
“I am not sure Britain has the strength to act alone … It doesn’t suit the tactic of the British government” to oppose such a deal while seeking a free-trade agreement with the United States, he said.
A crucial deal
“Microchips [are] a major strategic asset … as important in this era as steel in the previous era,” Mandelson continued. ARM-designed chips have become key technologies for artificial intelligence, machine learning, cloud computing and high-performance computing.
ARM’s business model “is based on neutrality and independence; it’s an open licensing model,” Mandelson explained. If the acquisition goes through, Nvidia “would have the power to restrict” licenses for ARM chips to competitors, he said.
This means that Europe’s hopes to become a leader in high-performance computing and artificial intelligence could be seriously impaired if Nvidia were able to prevent European companies from using ARM’s designs.
To maintain ARM’s independence, besides blocking the merger, Mandelson contended that “the best solution would be for ARM to be publicly listed on a number of stock exchanges.” He acknowledged the risk of a hostile takeover from Nvidia in that scenario, but a public listing would “equip the company with the means to defend itself,” he added.
Mandelson believed the tie-up was not just a matter of competition policy, “it’s a matter of geopolitics,” he said.
Nvidia being an American company, the acquisition would transfer powers to the U.S. administration which could then impose export restrictions on chips to protect national security interests and promote foreign policy objectives.
“The U.S. would have the power to shut-off chips … in companies or countries the U.S. doesn’t like,” he said.
The former minister contended that “at the European level, they talk about Europe’s strategic interest, without really seeing how this concept operates in the real world.” ARM is the “biggest example” which touches on the concepts of “sovereignty and autonomy.”
He added: “Europe’s got to have a much better and clear understanding on how geopolitical power can be used to Europe’s detriment. Not just by China, but even by one of its closest allies, the United States.”
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