The rumors are over. NVIDIA announced last night which has closed a deal to buy the tech giant ARM Holdings for $ 40 billion. The agreement was received with skepticism by some players in the sector, particularly in China, where they would see their position in the semiconductor industry weakened by passing ARM into the hands of a US company.
Based in Cambridge, ARM Holdings creates the designs for the ARM architecture chips that companies like Apple, Huawei and Qualcomm customize for their own processors. It is also in charge of developing the RISC-type instruction set that defines how to control these processors using software.
The Japanese multinational Softbank bought ARM for $ 31 billion shortly after the Brexit referendum in 2016. Then Softbank, in losses from some failed investments, such as the famous WeWork purchase, put ARM up for sale. The company hired Goldman Sachs in April to screen potential buyers. The bank had discussions with Apple, but Apple rejected the purchase. Later, it tried to form a consortium that included Qualcomm, Samsung and NVIDIA, each with a stake in ARM, but NVIDIA has become interested in the entire business.
NVIDIA has promised that “ARM will maintain the neutrality with the client that has been fundamental for its success”, but the antitrust authorities will now review the agreement and, according to the Chinese newspaper Global Times, NVIDIA is likely to encounter obstacles from Chinese regulators:
The “neutrality” is in serious doubt, as ARM will become part of an American company, which means that the Trump administration could contain the growing Chinese chip industry from the design side after the measures against Huawei, he told the Global Times Ma Jihua, a veteran telecommunications industry analyst.
“The acquisition will affect the development of China’s chipset industry, as most of its products are based on the ARM architecture,” Ma said.
Huawei’s Kunpeng, Kirin and Ascend chips are based on the ARM architecture. “If the United States prohibits ARM from cooperating with Huawei, Huawei’s chip design will be temporarily suspended,” said Huang Haifeng, an independent observer from the semiconductor industry.
Xiang Ligang, director general of the Beijing-based Information Consumption Alliance, told the Global Times on Monday that the Chinese government is likely to play a role in reviewing the case and that the chances of its approval are low.
“Regardless of whether the US government supports the purchase, its impact on the Chinese semiconductor industry is not something we want to see in the future,” Xiang said.
The domino effect of the acquisition will lead Chinese companies to seek alternative solutions, analysts said.
Beyond China, the deal is likely to provoke close scrutiny by antitrust authorities in the European Union and the United Kingdom. Hermann Hauser, one of the 12 founders of ARM Holdings, said in an interview with the BBC that the sale to NVIDIA is “a disaster” and that the UK government should intervene. “The saving grace of Softbank was that it was not a chip company, and it kept ARM neutral,” Hauser said. “If it becomes part of Nvidia, most of the licensees will be competitors of Nvidia and, of course, will look for an alternative to ARM.”
Companies like Apple and Qualcomm have a lifetime license for the ARM architecture, so they shouldn’t be affected by the purchase. Other companies could opt for RISC-V, an open source alternative to ARM that is growing rapidly in China.