Pioneering British microchip maker bought by Japanese conglomerate

British company Graphcore, which makes chips for artificial intelligence (AI) and was once seen as a potential rival to market leader Nvidia, has been acquired by a Japanese conglomerate.

Softbank has not disclosed how much it paid, but it is said to be significantly less than the £2 billion the British company was valued at after a 2020 funding round.

Nigel Toon, head of Graphcore, told the BBC it was “a great show of support for our team”.

However, the deal is likely to raise questions about the UK’s ability to develop companies that can compete with the biggest players in the growing AI chip market.

Ben Barringer, technology analyst at Quilter Cheviot, said it was “another bitter blow” to UK financial markets that Graphcore followed suit.

“This comes at a time when London is looking for a successful listing in a tech company to revive its reputation as a global financial centre,” he said.

Science Minister Peter Kyle called the deal a “welcome end to the uncertainty facing Graphcore and its employees”.

But he also admitted it was a “reminder of the important work that needs to be done” to make the UK “the best place to start and grow a business.”

Mr Toon said he believed the deal showed that British companies could compete with the big tech firms, claiming that Graphcore was “competing with the biggest companies in this sector, but with a much smaller team and much less capital”.

“It’s really positive for the UK to bring new investment here to drive growth. As we’ve all heard recently, that’s really important.”

He said he would remain as head of the company and that the move would result in Graphcore hiring new staff for its UK offices.

The company will now become a subsidiary of SoftBank, but its headquarters will remain in Bristol.

Mr Toon said he did not want to “enter into speculation” about the amounts involved.

But he did admit that the valuation of technology companies in general “goes up and down.”

“We have certainly seen the value of many other companies decline and investors have made some cautious decisions about the valuation of their investments on their books.

“Hopefully, as a result of this deal, we will see major investment and tremendous progress for Graphcore, together with SoftBank.”

Graphcore was founded in 2016 by Mr. Toon and Simon Knowles. Graphcore’s computer chips, the Colossus series, enable powerful computer processing.

However, the company has struggled with declining sales since hitting record valuations in 2020 and announced in 2022 that it had closed offices in Norway, Japan and South Korea.

That was a big disappointment, as Graphcore was at one point seen as a potential competitor to Nvidia in the AI ​​space.

The potential competitor has increased significantly in value and briefly held the title of the world’s most valuable company this year.

“I think this is actually good news for the UK technology sector and Graphcore,” said Dan Ridsdale, head of technology at Edison Group.

“Nvidia has established a dominant position in generative AI… but there are other opportunities within AI and the industry needs viable competitors.

“But Graphcore needs substantial capital. It is positive that Graphcore has found an investor willing to take the risk and provide the capital to put the company into the mix.”