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SoftBank hands Arm to Nvidia in $40bn ‘disaster’ deal

Nvidia has announced a deal to acquire Cambridge-based chip designer Arm Holdings for $40bn, pending approval from regulators. While Nvidia has said that Arm will continue to operate independently in Cambridge, there are concerns that the acquisition will erode Arm’s business model.

Arm is one of the UK’s most successful and influential companies, designing the industry-standard chip architecture found in all categories of computing devices, from supercomputers to microcontrollers, establishing it the world leader in processors for mobile devices.

Arm was added to the SoftBank portfolio in 2016 under a $32bn (£24.3bn) deal. 

Now, Nvidia is to buy a 90 per cent stake in Arm for $40bn (£31.2bn), leaving SoftBank Group with a 10 per cent share of the company, pending approval.

Speaking at a press conference, Jensen Huang, founder and CEO of Nvidia, told reporters that no one had ever created such a powerful force in technology as this partnership and that this purchase would “create the world’s premier computing company for the age of AI”.

Huang continued: “Uniting Nvidia’s AI computing capabilities with the vast ecosystem of Arm’s CPU, we can advance computing from the cloud, smartphones, PCs, self-driving cars and robotics to edge IoT and expand AI computing to every corner of the globe”.

He added that Arm would be staying in Cambridge, where it was founded in 1990. “Arm will remain headquartered in Cambridge," he said. "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.”

Huang told reporters that he wanted to take Arm and the UK to “even higher levels in AI leadership”. This will include building an “AI Centre of Excellence” in Cambridge featuring an AI supercomputer and teaching centre. Huang compared this in scale to the Large Hadron Collider or the Hubble Telescope.

Arm CEO Simon Segars said, in a prepared statement, that he was “delighted” to join Nvidia: “Arm and Nvidia share a vision and passion that ubiquitous, energy-efficient computing will help address the world’s most pressing issues from climate change to healthcare, from agriculture to education.

“Delivering on this vision requires new approaches to hardware and software and a long-term commitment to research and development. By bringing together the technical strengths of our two companies, we can accelerate our progress and create new solutions that will enable a global ecosystem of innovators.”

Despite reassurances from Nvidia and Arm leaders, concerns are brewing that its acquisition could compromise Arm’s unique and successful business model; that the deal will create tensions with its Chinese customers, as well as concerns that Nvidia will evade entering a legally binding agreement to retain Arm’s UK headquarters.

Geoff Blaber, a CCS Insight researcher, said: “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. It would accelerate the growth of RISC-V as an open-source alternative.”

Blaber predicted that Arms licensees - from Apple to Qualcomm - would mount “huge opposition” to the acquisition and that Nvidia would also face a serious challenge in securing regulatory approval. “This process will take months if not years with a high chance of failure," he said. "This process would be damaging to all parties and the uncertainty alone would hurt Arm regardless of the outcome.”

Reuters reported that there are “murmurs of protest” already emerging in China in response to the acquisition of Arm by a US-based company, amid the escalating US-China trade war. One China-based chipmaking executive opined “China is going to hate it”, adding that Arm will have a much harder job doing business in China with an American parent company.

Huang told reporters that Arm and its IP would continue to be registered in the UK (exempting it from many US export control rules); that Arm would retain its open licensing model, and would continue to act as a neutral supplier.

“Nothing changes in this transaction regarding the jurisdictions of the technology,” Huang said. He said that Nvidia will support Arm’s business model by licensing some of its own designs – including its GPU technology – through Arm’s network of partners, allowing them to compete with Nvidia.

Arm co-founder Hermann Hauser told Reuters that the deal is a “disaster for Cambridge, the UK and Europe” and should be blocked by regulators.

“It’s the last European technology company with global relevance and it’s being sold to the Americans,” Hauser said, recommending that the UK government should put three conditions on the deal: a guarantee of jobs in the UK; a promise to preserve Arm’s business model, and an exception to US security reviews on its partnerships.

Arm’s purchase by SoftBank attracted less immediate anger due to SoftBank not having a significant presence in the semiconductor industry, thus not presenting a threat to Arm’s well-established reputation as open and customer neutral. SoftBank also entered a legally binding pledge to maintain Arm’s UK headquarters for at least five years.

While Huang has said that Arm will remain based in Cambridge, he repeatedly refused to commit to entering a similar legally binding agreement with the UK government when questioned by journalists. Huang said that Nvidia had just started conversations with the UK government and that the company is “open-minded to create a constructive framework that reflects our intentions and our investment opportunities in the UK.”

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