When (or if) Nvidia acquires ARM, will it go for a 'BOGOF' but without the 'F'?

• UK competition authority launches investigation into ARM buyout
• Seeks views on the sale from "interested parties" prior to full-scale inquiry
• Worries that Nvidia will change ARM's highly successful open-licensing model 
• Could the future be 'Buy One (ARM licence) Get One (Nvidia licence) Far From Free' even if the customer doesn't want or need two?

What with all the ongoing excitement and disruption, the proposed acquisition of the hugely successful Cambridge, UK-headquartered semiconductor design company ARM by the US graphics processing chip giant Nvidia of California has been inching forward even as its media profile sank below sea level. Now it's back and bobbing about in plain sight as the UK's Competition and Markets Authority (CMA) calls for interested third parties to comment and pass judgement on the mooted and highly contentious $40 billion acquisition.

The submissions will inform the CMA's approach to the full-blown and probably protracted competition investigation that will begin sometime during the summer and could last until early 2022. Even then, regulatory approval is far from ensured. It is becoming increasingly possible that the UK government may in the end become involved and intervene to prevent the takeover, citing national security concerns whilst simultaneously demonstrating that it has "taken back control" of industrial strategy post-Brexit. Even if the deal does eventually clear UK hurdles, it will face many more in the EU, the US and other parts of the world.​

Back in 2016, when the UK voted to leave the European Union (EU), Softbank of Japan bought ARM for the comparatively modest price of $32 billion as the purchase coincided with the big fall in the value of the British Pound Sterling as the markets responded to the shock of the Brexit poll. ARM has 6,500 staff, of which 3,000 are employed in UK towns and cities including Belfast, Cambridge, Manchester and Warwick: Job losses will be inevitable if the deal goes through.

ARM is a world leader in the design and licensing of semiconductor architectures for smartphones, tablets, computers and servers, and the CMA is concerned that, when Nvidia become the owner, competition will be diluted by dint either of the enforced "retirement" of ARM products or price increases, or both. A further and even deeper worry is that Nvidia might downgrade or even do away with ARM's much-valued and highly valuable business model whereby it does not itself manufacture chips but licences the designs and technology that other companies then use to make their own products.

The administration of UK Prime Minister Boris Johnson also has anxieties that the sale of ARM intellectual property to an American company will inevitably bring it under the control of US import/export restrictions. Such a situation could have profound consequences for ARM's smartphone AI chips in China.

Andrea Coscelli, chief executive of the CMA, has issued a statement saying, "The chip technology industry is worth billions and critical to many of the products that we use most in our everyday lives. We will work closely with other competition authorities around the world to carefully consider the impact of the deal and ensure that it doesn't ultimately result in consumers facing more expensive or lower quality products." 

ARM's founder, Herman Hauser, is pushing the CMA to examine every aspect of the proposed acquisition in great detail and to impose the most stringent restrictions. Last October he wrote to the UK House of Commons Foreign Affairs Committee claiming that should the deal go through, the enlarged and American-owned and American-managed business will become "the next US technology monopoly" and in process of that mutation will kill ARM's "even-handed" business model and, in due course, destroy a globally-important flagship British high-tech company. 

Last year in an open letter, Jensen Huang, the founder and CEO of Nvidia, observed "ARM’s business model is brilliant. We will maintain its open-licensing model and customer neutrality, serving customers in any industry, across the world, and further expand ARM’s IP licensing portfolio with Nvidia’s world-leading GPU and AI technology.” Well, he would say that, wouldn't he?

Despite the protestations it is pretty much a racing certainty that once Nvidia swallows its ARM there will be changes to the licensing regime, probably linking ARM CPU core licences with Nvidia GPU cores. In other words, any company paying for an ARM licence will also have to take an Nvidia one as well, even though it has no need of a second licence or any intent ever to use one. It'll be a sort of 'Buy One Get One Free' (BOGOF) deal, but without the 'Free' bit.

What's the betting, as time goes by that the Nvidia part of the licensing equation will rise ever-upwards in price? Odds on, you say?