How Arm Became a Global Leader in Semiconductor Design
Arm, a Cambridge-based technology company, has achieved a stunning feat: its semiconductor designs have been incorporated into 250 billion computer chips worldwide, with thousands more being added every second. Despite being little celebrated in its home market, Arm is one of the few British tech firms that have truly succeeded in an industry dominated by US and Asian giants. In 2016, SoftBank Group acquired Arm for £24bn, a 43% premium on its share price before the offering. The Japanese company’s aim was to capitalize on Arm’s increasing prevalence in an economy that has become increasingly digitized.
But the global downturn in the tech industry since then has hit SoftBank, and its founder Masayoshi Son is looking to float Arm again as a public company to raise fresh funds. Although the UK government has tried to entice the company into a London listing, Arm will instead be appearing on the Nasdaq in New York. With the company’s corporate center of gravity also moving to its major clients in the United States, and in particular with current US CEO Rene Haas working out of San Jose, the British government’s ambitions of establishing the UK as a technological superpower have markedly cooled.
In this context, James Ashton’s book, The Whole Project: The Microchip Design That Changed the World, is a timely exploration of Arm’s success. Ashton notes that Arm was originally a Cambridge company with a global influence, and established itself as one of the “Switzerland of semiconductors” by partnering with nearly every major chip maker. However, he is skeptical about the UK government replicating the company’s success with another start-up, saying that doing so would be as difficult as creating the next Google.
Instead, Ashton recommends that government policy should emphasize fostering skills and training, as well as providing stable tax and regulatory regimes. Yet this may be hard to achieve, given the huge investments made by rival governments in the US, the EU, and China. These countries have been pouring billions of dollars into their respective chip industries as they recognize the pivotal role that semiconductors play in maintaining national competitiveness in a digitized economy.
The Rise of Arm: Origins, Strategy, and Success
Arm grew out of Acorn, an early beneficiary of the personal computer revolution. It was founded by Cambridge physicists Hermann Hauser and Chris Curry, with Arm CEO Robin Saxby famous for his energy and creativity in winning over clients. Early backing from Apple and Steve Jobs helped to propel Arm into the big league, although it was also supported by nearly every major chipmaker as it sought to license its technology globally.
Its unique selling proposition was that its processors were highly efficient, making it extraordinarily successful in a capital-hungry industry. By becoming the “Switzerland of Semiconductors,” Arm secured its position as a global leader of the digital economy. Its chips are found in digital devices ranging from smartphones and cars to data centers, and are used by companies across the globe.
However, it’s important to note that Arm had an amalgam of Cambridge geek and street hustle propelling it towards success. Indeed, its success inspired a number of deep tech start-ups that emerged from Britain’s “silicon swamp.” Ashton notes that in many ways, Arm was quaintly British in its origins yet extraordinarily global in its impact.
Additional Piece: Arm’s Success as a Blueprint for the Future
Ashton suggests that there is no blueprint for replicating Arm’s success, but there are some lessons that can be drawn from its journey to becoming a global leader in semiconductor design. These lessons include:
1. Collaborate with competitors: Arm’s success was in part due to partnering with nearly every major chipmaker, allowing it to license its technology globally. This highlights the importance of collaboration over competition in an increasingly digitized economy.
2. Be efficient: Arm’s processors were highly efficient, making it successful in a capital-hungry industry. Start-ups should focus on being efficient with their resources, particularly in their early stages.
3. Foster innovation: Arm’s success also relied on its mix of Cambridge geek and street hustle. The company’s early CEOs were particularly effective in winning over clients, and Arm created something that was “too convenient, too reliable, and too cheap” for users to bother looking for an alternative. This kind of innovation requires combining technical expertise with effective outreach.
4. Remain neutral: Arm became the “Switzerland of Semiconductors” by remaining neutral and partnering with almost anyone. It was never perceived as a competitor, but rather as a partner. This is a strategy that could work in other industries as well.
Overall, while there may be no exact roadmap to achieving Arm’s success, it is clear that combining collaboration, efficiency, innovation, and neutrality can go a long way towards establishing a start-up as a trailblazer in the digital economy. With so many new challenges and opportunities emerging on a near-daily basis, it is essential for start-ups to remain flexible, nimble, and ready to embrace change as it comes.
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This February, Cambridge-based technology company Arm has achieved a remarkable result Record: His semiconductor designs have been incorporated into a staggering 250 billion computer chips. That number was being added by another 1,000 every second, powering nearly everything in our digital economy, from smartphones to cars to data centers.
Little celebrated in its home market, Arm is one of the few British tech companies to count for anything in an industry dominated by US and Asian giants. “Here was a little speck of Britain pulsating with data billions of times, right across the planet, largely unknown outside its industry,” writes James Ashton in his spirited company history.
Like many other up-and-coming British tech companies, Arm (which stands for Advanced RISC Machine) has been much more popular with foreign strategic investors than fickle shareholders in the City of London. In 2016 SoftBank Group, managed by the maverick Japanese entrepreneur Masayoshi sonsnapped the company for £24bn, a 43% premium. at its share price before the offering. “One day, when I look back on my long life as an entrepreneur, I believe Arm will stand out as the most important acquisition and investment I’ve made,” Son said, predicting the company’s chips would become ubiquitous as everything became digitally connected, present in running shoes, glasses and even milk containers.
SoftBank Group it has since been ravaged by the downturn in the tech sector and Son is now looking to refloat Arm as a public company to raise new funds. Despite the UK government’s best efforts to entice the company to relist in London, Arm will appear again on the Nasdaq in New York market this year. Arm’s corporate center of gravity is also shifting to its major clients in the United States with its current US chief executive officer Rene Haas working from his San Jose office. The much-hyped ambitions of the British government to turn the UK into a technological superpower have been toned down.
As Ashton records, Arm was quaintly British in its origins yet extraordinarily global in its impact. Established in 1990, the company’s first headquarters were in a former turkey farm barn in Swaffham, Bulbeck, a village eight miles from Cambridge renowned for its annual performances of Gilbert and Sullivan plays. Unlike the big US chip companies, Arm was relatively capital hungry, but that thrift helped make the company’s processors extraordinarily efficient.
Early backing from Apple, then managed by the mercurial Steve Jobs, propelled Arm into the big league. By partnering with nearly every major chip maker, Arm has licensed its technology globally and has become the neutral “Switzerland of Semiconductors.” Arm created something that was “too convenient, too reliable, and too cheap” for users to bother looking for an alternative.
Arm has always relied on a potent amalgam of Cambridge geek and street hustle, providing the initial inspiration for a number of ‘deep tech’ start-ups that emerged from Britain’s ‘silicon swamp’. The company originally grew out of Acorn, an early beneficiary of the personal computer revolution, founded by Cambridge Austrian physicist Hermann Hauser and Chris Curry, who began his entrepreneurial career as a schoolboy sourcing television components from junkyards to make amplifiers for clubs rock bands.
One of Arm’s early CEOs, Robin Saxby, was particularly famous for his energy and creativity in winning over clients. Hearing that a Japanese businessman was a Monty Python fan, he moved a meeting into a hotel corridor for a parade of silly walks. “Eccentric, relentless, but ultimately very effective,” writes Ashton.
As City’s former editor at the Sunday Times, Ashton has followed Arm’s story for many years and interviewed key players in the corporate drama. Although his book revolves around Arm, he also writes about the parallel development of the US and Taiwanese chip industries, exploring the rise of Intel, Taiwan semiconductor manufacturing company and NVIDIA. But this story has already been told more skillfully and comprehensively by Chris Miller in his book Chip Warthat last year win the Financial Times Business Book of the Year Award.
Ashton concludes that trying to “create another arm is as insane as trying to create the next Google.” His recommendation is that the UK government instead focus on training and skills and provide a stable tax and regulatory regime.
But at a time when governments in the US, the EU and China are investing billions of dollars to subsidize their chip industries, this political recipe looks like thin gruel. Serendipity cannot replace strategy. And, as one industry executive is quoted as saying, “Without semiconductors, you’re nowhere.”
The Whole Project: The microchip design that changed the world by James Ashton, Hodder & Stoughton £20, 464 pages
John Thornhill is the innovation editor of the FT
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