In a Historic $40 Billion Deal, NVIDIA Acquires Arm Amid Potential Backlash from Chip Industry

In an official press release yesterday, September 13th, Arm Holdings announced that its owner, SoftBank Group Corp (SBG), had completed talks with NVIDIA . This means the UK-based chip giant’s vast computing ecosystem will merge with NVIDIA's leadership in artificial intelligence (AI) to drive innovation for all customers and create “a premier computing company for the age of AI.”

 

In a Historic $40 Billion Deal, NVIDIA Acquires Arm Amid Potential Backlash from Chip Industry

Arm's headquarters in Cambridge. Image used courtesy of
 

Although the announcement bumped NVIDIA's share price by over 5% when markets opened this morning, it’s not all good news. This acquisition is unlike any other that the industry has previously seen and, according to analysts, NVIDIA is facing potential backlash from both the UK government and industry rivals.

 

A Controversial Deal

It's been only a few years since Arm was sold to SBG. The deal, . So, what’s the problem this time? Why has this acquisition by NVIDIA led to widespread discomfort and backlash?

 

In a Historic $40 Billion Deal, NVIDIA Acquires Arm Amid Potential Backlash from Chip Industry

NVIDIA's acquisition of Arm closed for $40 billion yesterday, sending shockwaves across the industry. Image used courtesy of
 

SBG is merely a holding company and has little involvement in the chip industry whereas NVIDIA is directly involved in the chip industry as a manufacturer of graphics processing units (GPUs) and other technology. Arm also plays a huge role in the chip industry as the company behind the Arm architecture, which it licenses out to other companies—many of whom are NVIDIA's competitors—for a fee.

These companies, which include the likes of Apple, Broadcom, Inter, Qualcomm, and Samsung Electronics, build their own chips around Arm's architectures. In fact, there’s a good chance that if you’re reading this article on a phone or tablet, it has Arm architecture at its core.  

 

A Possible Conflict of Interest for NVIDIA?

Although NVIDIA's dominance is primarily centered around its GPUs, the company has been toying with hardware production that targets AI applications (much like other big chipmakers have)  for “next-generation autonomous machines,” which feature an Arm architecture. NVIDIA is diversifying, and its acquisition of Arm raises several questions concerning impartiality and neutrality. 

 

In a Historic $40 Billion Deal, NVIDIA Acquires Arm Amid Potential Backlash from Chip Industry

Arm's architecture appears in manifold designs, from machine learning to embedded devices. Image used courtesy of
 

Indeed, there is an obvious . What this conflict could mean and lead to is anyone’s guess, but one possibility is that . Another is that the UK government may impose restrictions as it did in 2016 when SoftBank acquired Arm. It’s impossible to say what the fallout will be, or indeed if there will be any at all. 

However, there has been some political backlash that began prior to the deal closing, with the UK Shadow Business Secretary, the Rt. Hon. Ed Miliband MP, . The opposition party has since reaffirmed its position, calling on the government to .

 

How the Merger is Set to Play Out

According to NVIDIA, Arm’s open-licensing model and IP licensing portfolio will continue as normal while benefitting from NVIDIA technology, with clear, strong assurances on the front of customer neutrality. In short, NVIDIA will not attempt to abuse its position as the owner of Arm to compete unfairly. 

NVIDIA also plans to expand Arm’s R&D presence in Cambridge, UK, with . NVIDIA also plans to build an Arm/NVIDIA-powered AI supercomputer for “groundbreaking research,” reads NVIDIA's press release.

 

In a Historic $40 Billion Deal, NVIDIA Acquires Arm Amid Potential Backlash from Chip Industry

The new research center aims to create a supercomputer, research fellowships and partnerships, AI training, a startup accelerator, and industry collaboration. Image used courtesy of
 

This should stave off worries that NVIDIA plans to pull Arm’s UK presence and move operations in the short-term. But without government intervention, there is nothing to prevent this in the long-term, and such practices are not without precedent. 

 

Potential R&D Benefits of the Merger

Naturally, NVIDIA has been quick to address the positives of its deal. “This combination has . For Arm’s ecosystem, the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with NVIDIA’s world-leading GPU and AI technology,” said NVIDIA founder and CEO Jensen Huang. He went on to stress that “Arm will remain headquartered in Cambridge.”

 

In a Historic $40 Billion Deal, NVIDIA Acquires Arm Amid Potential Backlash from Chip Industry

NVIDIA's “Endeavor” location in Santa Clara, California. Image used courtesy of
 

As per the terms of the deal, NVIDIA will pay $12 billion in cash and $21.5 billion in NVIDIA's common stock to SoftBank in cash. At closing, the number of NVIDIA shares to be issued is 33.4 million. NVIDIA will also pay $1.5 billion in equity to Arm employees.

Of course, the proposed deal is subject to closing conditions, including regulatory approvals in the UK, China, the European Union, and the United States. The deal is expected to be finalized and completed within the next 18 months.