The cofounder of Arm is trying to block the chip design firm's $40 billion sale to Nvidia, saying it would 'destroy' its business model while making the UK 'collateral damage' in US-China tensions

• Hermann Hauser, the cofounder of chip designer Arm, wrote a letter to the UK Prime Minister urging him to block Nvidia from buying the firm from Softbank in a $40 billion deal.
• Nvidia's acquisition of Arm could 'destroy' the firm's business model, may force hundreds of its customers across the globe to contend with strict US trade laws, and cause UK-based Arm employees could lose their jobs, Hauser said. 
• Arm and Nvidia both publicly downplayed the risks to an acquisition.
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The cofounder of the ubiquitous chip designer Arm is trying to stop Nvidia's $40 billion deal with Softbank to buy the company. 

Hermann Hauser, a cofounder of Arm who no longer works for the company, wrote an open letter to the Prime Minister of the United Kingdom outlining his concerns with the deal and urging others to sign it in opposition, too. According to Hauser, the deal could lead to lost jobs and hurt the United Kingdom's role as an economic superpower, especially as tensions between the US and China continue to escalate.

"As the American president has weaponised technology dominance in his trade war with China, the UK will become collateral damage unless it has its own trade weapons to bargain with," Hauser wrote.

Hauser also says that the deal has the potential to "destroy the very basis of Arm's business model" which he described as being the "Switzerland" of the semiconductor industry: It has over 500 licensees, including a roster of Nvidia competitors, with its intellectual property powering devices from Microsoft, Samsung, Qualcomm, and Huawei, among many more. Apple even plans on using Arm-based processors for future Macbooks.

He worries that Nvidia would get "preferential treatment" over other Arm licensees, which could create a backlash from those companies — a risk to the deal's success that other analysts have warned about too. As one CCS Insight analyst put it: "Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode."

Hauser also wrote that tensions between the US and China could impact Arm's business if it's owned by US-based Nvidia. Hundreds of UK companies that use Arm chips and export their products to China would have to contend with strict US regulations, he said. 

"Sovereignty used to be mainly a geographic issue, but now economic sovereignty is equally important," Hauser wrote. "Surrendering UK's most powerful trade weapon to the US is making Britain a US vassal state."

Hauser's letter also said the deal could mean job loss for thousands of Arm employees in Cambridge, Belfast, Manchester, and other towns as a result of Nvidia acquiring Arm and moving its headquarters to the US.

Hauser made three recommendations to the Prime Minister to protect the UK's national interests and to preserve Arm's status as a neutral chip designer: Nvidia would need to make legally-binding agreements not to cut UK-based jobs at Arm, not give itself preferential treatment over any other Arm licensees, and to give Britian exemption from US trade laws so UK companies may continue accessing Arm "unfettered."  

Arm did not immediately respond to Business Insider's questions about Hauser's letter but, publicly, Arm CEO Simon Segars dismissed concerns about trade relations in a press conference, saying that because the "majority" of Arm's products are designed outside the US, they don't need to follow US trade regulations.

In a press release, Nvidia also addressed job fears, promising that the firm's headquarters would remain in Cambridge. It also said it would expand AI research on-site and build an AI supercomputer using Arm central processing units. Arm's intellectual property would remain in the UK as well.

The deal was a long time coming. It has been rumoured for months Nvidia would buy Arm from Softbank, which previously bought it in 2016 for $32 billion. The acquisition could take more than a year to complete.