Nvidia Acquires ARM from SoftBank for US$40 Bil.
Nvidia will acquire ARM from SoftBank for US$40 billion.
Nvidia officially announced on Sept. 14 that it would acquire ARM from SoftBank for US$40 billion. This is the biggest deal in the history of the global semiconductor industry. The down payment is US$2 billion, US$10 billion will be in cash, and US$21.5 billion will be in the form of Nvidia shares.
Reuters reported that the contract would lead to a sea change in the industry as Nvidia can get the upper hand on Intel and Samsung Electronics in the future semiconductor market by obtaining CPU technology via ARM. Nvidia surpassed Intel in market cap in early July this year after posting a record performance in the second quarter. At present, the former’s market cap is about 150 percent of the latter’s.
Nvidia is currently leading the global AI ecosystem with its GPGPU technology characterized by boosting the capacity of processing by means of parallel GPUs. Likewise, ARM has led the global mobile semiconductor market since the advent of smartphones with its low-power chip design capabilities. Nvidia now has both CPU and GPU technologies, meaning it can become a leader in the era of Industry 4.0.
It is pointed out that the deal will adversely affect Samsung Electronics in the long term in the form of a closed patent policy or high patent fees. So far, ARM’s influence in the market has been based on its neutrality, that is, non-intervention in manufacturing. However, its relations with clients such as Samsung, Apple and Qualcomm may change after the acquisition.
It is also pointed out that Nvidia and Samsung Electronics are now partners after their recent contract for GPU production. Early this month, Nvidia unveiled GeForce RTX 30 Series GPUs and announced that those would be produced based solely on Samsung Electronics’ 8-nm foundry process. This surprised many because 20-year partner TSMC was excluded. “Although Samsung Electronics and Nvidia compete in the industry, they also have common interests, which implies that they are likely to compete and cooperate at the same time as Apple and Samsung Electronics do in the smartphone market,” said an industry expert.
Another prediction is that the British chip designer, which has been politically neutral, now can be used as the United States’ tool for pressure on China. The United States is trying to keep China in check in the semiconductor industry with its restrictions on Huawei and its power in the industry can further increase with Nvidia dominating mobile application processor design as well as GPU. China’s goal to become 70 percent self-sufficient in the industry by 2025 is likely to take a direct hit.
From Sep. 15 onwards, global semiconductor companies cannot supply Huawei with semiconductors based on U.S. software and equipment. The United States is considering applying the same restrictions to SMIC, the largest foundry in China, as well in that Huawei may try to procure more from SMIC as an alternative to TSMC. SMIC is currently concentrating on 14-nm processes and planning to introduce 7-nm next year. Its plan, however, is likely to be thwarted by U.S. restrictions and this may deal a staggering blow to China’s semiconductor industry.
In addition, China’s smartphone industry may collapse if the United States blocks Chinese smartphone manufacturers from using ARM’s application processor designs. Samsung Electronics, Qualcomm and HiSilicon produce smartphone application processors from ARM’s designs. However, Samsung Electronics and Qualcomm produce their own processors by adding their technologies to the designs whereas HiSilicon, Huawei’s chip design subsidiary, uses the designs as they are.
Still, there are hurdles before the completion of the acquisition. Those include antitrust reviews in the United States, Britain, the European Union and China. This is predicted to take a year and a half and will be far from easy. Five years ago, Qualcomm planned to acquire Dutch semiconductor company NXP for US$44 billion but failed to obtain China’s approval.