Nvidia $40 Billion Deal to Buy Arm Incites Controversy from Competitors

By Avi Ben Ezra Wednesday, September 16, 2020

Nvidia Corporation announced its plan to acquire the UK chipmaker, Arm, from Softbank Group in a $40 billion deal, a deal that would restructure the global semiconductor industry.

Arm, a chipmaker that supplies Apple and others in this industry would fall under the control of a single company, Nvidia, the largest semiconductor company in the US by market value. However, the deal is likely to face challenges from its rivals and regulators.

If the deal happens, Japan’s Softbank will exit from Arm just four years after the group acquired it for $32 billion. Masayoshi Son, the CEO of Softbank, cited Arm’s great potential, but is cutting his stakes in major assets to raise capital.

A Game-Changing Deal

Softbank’s decision to sell Arm comes after the group held discussions about taking the company private, according to Reuters's sources. The discussions could move forward after the acquisition.

Under the agreement, Nvidia will pay SoftBank in shares and $12 billion in cash, as well as a $2 billion signing-on fee. After the deal concludes, Softbank and its $100 billion Vision Fund will gain a stake ranging from 6.7% to 8.1% in Nvidia.

Jensen Huang, Chief Executive of Nvidia, said the deal — which would reinforce his company in data center chips — was “pro-competition.” This deal would mark “the first time in history the industry could see something that is genuinely alternative” to Intel Corp’s domination of the semiconductor market, Huang said.

He pointed out that Nvidia wouldn’t alter Arm’s neutral licensing model, but expand it by licensing out Nvidia intellectual assets for the first time.

The California-based tech company said it would license its leading graphical processor unit through Arm’s broad network of silicon partners. Nvidia plans to start producing chips for other devices, including self-driving cars, but will also make its technology accessible to others.

Will the Deal Get Approval?

Just a few hours after the announcement, critics voiced their concerns about Arm’s ability to maintain its inclusive approach if it falls under the control of a US company during the period of dispute between China and the U.S.

Analysts firmly believe that the deal between Nvidia and Arm is likely to face strong pushback from Nvidia's market rivals.

Arm is one of the lead suppliers of designs and intellectual property for the largest semiconductor companies, including Intel Corp., Qualcomm Inc., and Samsung Electronics Co. Ltd. — all of which are big rivals to Nvidia.

Arm’s inclusive approach to license its designs to anyone interested has helped create its huge network ecosystem of devices, from smartphones to smart toasters.

The deal would put Arm under the control of a US-based company amid the trade war between the United States and China, which is striving to develop its semiconductor sector that the US is attempting to impede.

Geoff Blaber, the VP of Research at CC Insight, shares the opinion that the deal “will rightly face huge opposition” from Arm’s customers.

Blaber also pointed out that the deal could drive semiconductor companies toward RISC-V, an open standard instruction set architecture that is not controlled by a single entity.

“An acquisition by Nvidia would be detrimental to Arm and its ecosystem,” he said. “Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode.”

Nvidia CEO Jensen Huang and Arm CEO Simon Segars said in an interview with Reuters that Nvidia would keep Arm’s headquarters in the United Kingdom, relieving it from US export control laws and helping it retain its open licensing model.

Linley Gwennap, principal analyst at The Linley Group, said Nvidia “took great pains to emphasize that Arm will continue to act as a neutral supplier, and it must not interfere with any of Arm’s licensing efforts, even if some Arm customers compete with Nvidia,”

Shares of Softbank rose nearly 9% in Tokyo, while NVDA stock surged 5.8% higher on the day the deal was announced.

Summary

The US technology company Nvidia Corp. is set to acquire the British semiconductor maker Arm in a $40 billion deal from SoftBank Group. The deal will likely face opposition from regulators, especially from rivals, as Arm is one of the main suppliers to some of the largest semiconductor and tech companies, including Apple, Intel, Samsung, Qualcomm, and more.

About the Author


Avi Ben Ezra

Avi Ben Ezra is the Chief Technology Officer (CTO) and Cofounder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.

Related Articles