UK-based chip designer Arm Holdings is to be sold to America’s Nvidia in a deal worth up to $40bn (£31bn).

But the sale was described as a “disaster” by Arm’s co-founder.

Nvidia said the company which licenses its chip designs for use by major electronics brands such as Apple – would remain based in Cambridge and its site expanded.

However, Arm’s co-founder Hermann Hauser told Reuters: “It’s a disaster for Cambridge, the UK and Europe.

“It’s the last European technology company with global relevance and it’s being sold to the Americans.”Advertisement

Chipmaker Nvidia is buying the business from Japanese technology empire Softbank, which acquired it four years ago for £24bn but has recently been seeking to raise cash.

The deal is likely to face close scrutiny from regulators and rivals.

Nvidia chief executive Jensen Huang said: “Arm will remain headquartered in Cambridge.

“We will expand on this great site and build a world-class AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields.”

Arm licenses its designs to most of the global semiconductor industry with customers including Intel, Qualcomm and Samsung.

The 180 billion chips sold based on its technology range from smartphones to toasters.

Nvidia’s acquisition of Arm is controversial because Arm’s customers are among Nvidia’s rivals.

The deal also puts the chip designer in the hands of a US-based firm at a time of trade friction between Washington and Beijing that is partly focused on technology with Beijing trying to develop its own semiconductor industry.

Nvidia insisted that Arm would maintain the “global customer neutrality that has been foundational to its success”.

Mr Huang said the deal was “pro competition” and could create a “genuinely alternative” rival to Intel’s domination of the sector.

However, Mr Hauser who previously expressed his dismay about Arm’s sale to Softbank said the Nvidia deal would destroy Arm’s business model as “the Switzerland of the semiconductor industry”.

He called on the UK government to demand: a guarantee of jobs in Britain, the preservation of Arm’s open business model; and exception to US security reviews on client relationships.

Nvidia will pay SoftBank $21.5bn in shares and $12bn in cash for Arm, with the transaction expected to complete by March 2022. Arm employees will also be issued with $1.5bn in Nvidia shares.

Softbank could receive an extra $5bn in cash or shares depending on Arm’s business performance.

Experts at the time of Arm’s sale to Softbank warned of a “brain drain” and there have been renewed concerns about its future in the run-up to the latest deal.

Last week, Labour’s Ed Miliband urged the government to obtain “legally binding assurances” that the business would remain in the UK “rather than see jobs and decision-making moved across the ocean”.