Nvidia to face the music after inking $40 bn deal for Arm

Nvidia Corp’s $40 billion deal to buy chip designer Arm from SoftBank Group is likely to meet strong opposition from Nvidia’s chip industry rivals, analysts say.
Nvidia at trade show
Arm has a strong presence as a supplier of designs and intellectual property to most of the semiconductor industry, licensing its technology to customers such as Intel, Qualcomm and Samsung who increasingly compete with Nvidia.

Arm’s approach of licensing its designs to all comers has turned the 160 billion chips sold based on its technology into a huge ecosystem of devices from smart phones to smart toasters.

Nvidia’s deal would put Arm under the control of a U.S.-based combatant amid a battle between the United States and China, which is rushing to develop a domestic semiconductor industry while U.S. officials seek to stem its rise.

The deal will face huge opposition from Arm’s customers. An acquisition by Nvidia would be detrimental to Arm and its ecosystem. Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode, Geoff Blaber, vice president of research for the Americas with CCS Insights, said.

Nvidia CEO Jensen Huang and Arm CEO Simon Segars told Reuters in an interview that Nvidia will retain Arm’s United Kingdom headquarters – which exempt it from many U.S. export control laws – and open licensing model.

Nvidia will expand the model by licensing some of Nvidia’s designs – including its graphical processing unit, or GPU, technology – through Arm’s network of silicon partners. That move would in theory allow those companies to compete with Nvidia.

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,” said Linley Gwennap, principal analyst at The Linley Group.

“China is going to hate it,” said one Chinese chip executive, noting that American companies working with Arm to create server chips would likely have a harder time selling in China if Arm had an American parent company.

South Korean chip industry officials and experts said that Nvidia’s Arm buy would intensify Nvidia’s competition with Samsung, Qualcomm and others in self-driving cars and other future technologies, while raising concerns that Arm could hike licensing fees for competitors.

Park Jea-gun, head of the Korean Society of Semiconductor & Display Technology, said the move marks an attempt by Nvidia to make an even deeper foray into the automotive chip market, where self-driving cars are set to take off and where Samsung and Qualcomm are making big pushes.

CCS Insights’ Blaber said Nvidia’s deal could also drive chip companies toward RISC-V, an open-source alternative technology that is supported by a nonprofit foundation but not controlled by any one entity.

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