Britain risks a tech “talent drain” to the US if British pension funds fail to back the sector, according to the co-founder of a UK chipmaker that has announced its sale to Japan’s SoftBank.
Nigel Toon, the co-founder and chief executive of Graphcore, said domestic pension funds were giving inadequate support to private businesses in the UK.
“They’re certainly not investing in private companies here in the UK,” he said. “How can we expect businesses to grow without those pools of capital unless they secure funding from other sources?”
As well as British pension fund investors missing out on the benefits, said Toon, there was a risk that UK tech talent is lured away by foreign investors that have stepped in to provide growth funding. US-based venture capital firms could, for instance, require British startups to move across the Atlantic, the Graphcore boss said.
“You naturally get this drain away of good talent from the UK if you’re not careful,” Toon said. “If there isn’t those pools of capital, if they don’t exist here, then the risk is that some of those young companies will be pulled away.”
The Bristol-based startup’s products are focused on artificial intelligence, and Toon acknowledged Britain was “doing well” in AI but that was mainly driven by foreign investment from big US tech firms such as Microsoft, Meta and Google, which bought the UK-based DeepMind in 2014.
Toon said the SoftBank deal would lead to a multibillion-pound investment in the UK.
“This is probably going to end up bringing billions in investment in AI to the UK,” he said, adding that Graphcore would grow its 350-member workforce and build a “very substantial AI engineering effort”.
Last year, Graphcore warned that there was a “material uncertainty” over its survival and that it needed fresh funding by May 2024.
Peter Kyle, the secretary of state for science, innovation and technology, alluded to Graphcore’s problems as he backed the deal, saying it was a “welcome end to the uncertainty that has faced Graphcore and its employees”.
Graphcore is the latest UK tech company to be bought by SoftBank, which acquired the Cambridge-based chip designer Arm for £24bn in 2016.
SoftBank remains the biggest shareholder in Arm after its listing in New York last year. It also recently led a $1bn (£774m) investment in the British self-driving technology startup Wayve.
Toon said the demand for computing power to train and operate AI systems was vast and was continuing to grow. Graphcore makes chips called intelligence processing units, which can be used to train and operate AI models.
Chips are a core piece of hardware behind AI models such as OpenAI’s GPT-4, and demand for them has driven the valuation of Nvidia, the market leader, which makes a different type of chip called a GPU, to more than $3tn.
“The opportunity here is not to replace Nvidia, which I think is a sort of poor analogy. It’s bringing choice for people and bringing different approaches that allow new types of AI to be developed,” he said, adding that the AI chip market could develop into “two or three” big players including Nvidia.
“Can we be one of those other players sitting alongside Nvidia? Absolutely,” Toon said.
SoftBank said products such as Graphcore’s would be vital as the tech industry pushed for artificial general intelligence – systems with human-level capabilities.
“Next-generation semiconductors and compute systems are essential in the AGI journey. We’re pleased to collaborate with Graphcore in this mission,” said Vikas J Parekh, a managing partner at SoftBank Investment Advisers.
The Financial Times, citing two people familiar with the matter, put the value of the deal at $600m. Valued at $2.8bn at the end of 2020, a filing published last year revealed Graphcore needed more cash to break even, after cutting its headcount by a fifth and shutting operations in Norway, Japan and South Korea.
Graphcore will continue to be based in Bristol, with offices in Cambridge, London, Gdańsk in Poland and Hsinchu in Taiwan.
