Nvidia’s purchase of Arm now looks unlikely without significant conditions...
Feb 15, 2021
- And even then there will be reluctance to see the sale occur
- A large number of large companies have all piled on, urging the authorities to investigate
- A drawn-out process looks likely
Back in September 2020, chip specialist Nvidia agreed to acquire British chip designer Arm from SoftBank for $40 billion. It was bound to be a controversial move and much has happened since then, not least a further rise in international distrust on the technology front. The result being that the vulnerabilities of a globalised IT ecosystem with specialists in one country providing key technology to important players in another country - or to a company with a diametrically opposed business model - are now all too apparent.
Nvidia is a US based multinational specialising in graphics technology and system on a chip (SOC) units for the mobile computing and automotive markets. Arm licenses its processor designs to other chip companies who tend to add extra features or cores to get the performance and features they want. The big boys including Apple, Qualcomm, and Amazon all use Arm designs.
Arm’s business model trades revenue per chip for volume and relies on the assurance that Arm will continue to treat all its customers in a neutral manner and won’t attempt to bait and switch on pricing. Arm’s approach has worked terrifically well so far and it’s estimated that 180 billion (with a ‘b’) Arm-designed chips have been shipped since the company was founded in Cambridge England, nearly 30 years ago.
That dynamic makes the sale of Arm from one company to another particularly delicate and alarm bells rang out in September the moment the sale from Softbank to Nvidia was announced . The bells have grown louder since.
Most significantly from Qualcomm, which is hugely reliant on Arm designs for most of its line, including its key Snapdragon line of smartphone processors.
Arm and Nvidia have made all sorts of assurances that the business model won’t change and that the company will continue to be based in Cambridge, but Qualcomm worries that the sale could see Nvidia becoming a gatekeeper to Arm’s technology with negative consequences. The high price paid - $40 billion - causes the San Diego giant to worry that Nvidia will have to find ways to drive extra revenue to justify the purchase.
Most recently more big companies have joined the chorus against the sale, and the authorities from both the European Union and the UK have instigated “in-depth” probes into the acquisition. China too, fearful for obvious reasons, has set the China State Administration for Market Regulation onto the case.
The spate of objections from the likes of Microsoft and Google, Huawei, Apple, Samsung and Intel has reportedly convinced the US Federal Trade Commission that it needs to review the deal.
Taken together the multiple probes promise to take many months as the FTC and others will demand vast shed-loads of documentation and seek views from the industry.
And not just the US, of course, the UK’s Competition and Markets Authority (CMA) is also probing. As a result 18 months is being mentioned as the likely time-frame for a decision.
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