Nvidia reached a deal with SoftBank Group in September 2020 to acquire ARM Holdings, but the deal has since met fierce opposition from major tech giants.
It was in September 2020 that Nvidia announced it was acquiring ARM for a juicy sum of $40 Billion. The agreement was reached between Nvidia and the SoftBank Group, which currently owns ARM Holdings and has been pending regulatory approval. Unfortunately, the deal is encountering major regulatory hurdles, with brands coming out in protest all over the world. The latest opposition comes from Microsoft, Google and Qualcomm who are urging regulators to prevent the deal from going through.
ARM isn’t in the business of making SoCs, but instead, licenses the instruction set and core designs to others. Currently, over 90 percent of the smartphones in the world use ARM’s designs for their SoCs. Apple, which recently moved over to their own M1 chipset, also licenses ARM’s instruction set but does not utilise ARM cores. Needless to say, Apple too has come out against the merger. Interestingly, Amazon’s Graviton2 processor, which offers incredible performance jump over Intel and AMD’s parts, also utilise ARM’s N1 cores which are a derivative of the Cortex-A76 cores from ARM. With ARM’s designs being used in so many different areas of computing, companies are worried that once Nvidia gains control over ARM, the graphics company might leverage licensing deals that are currently in place. While Nvidia and ARM aren’t direct competitors, once the graphics company acquires ARM, tech companies allege there is going to be a conflict of interest and Nvidia would be in the position to gravely impact product and business models of most companies involved.
Pushback from big tech companies isn’t the only thing jeopardising the acquisition though. Arm Holding’s China division is going to be another major roadblock in this journey. ARM China has six investment firms, of which, four are now controlled by Allen Wu, Chief Executive ARM China. In June 2020, ARM China’s board moved to remove Wu as the Chief Executive, with both parties almost reaching an amicable separation. However, the value of the nearly 17 percent stake owned by Wu through the four investment firms has become a bone of contention, with Wu arguing that ARM China’s value has gone up five times since its establishment. In the time since then, Wu has put his own security team in charge of ARM China, denying entry to representatives of ARM and ARM China. Emails from ARM headquarters to employees of ARM China are also being filtered out, according to a report by Financial Times. Unless this standoff in the Chinese arm of ARM is resolved, the acquisition will not be able to go through, since it requires the approval of authorities in the U.S., Europe, China and the U.K.
As it appears, the deal between Nvidia and SoftBank for ARM Holdings seems to be an uphill battle. It is true that once Nvidia acquires ARM, it will directly hold a key piece of technology needed by its competitors to do business. Qualcomm seems to be building a case against the deal, stating that the only way Nvidia can make this transaction profitable is to eventually act as the gatekeeper for ARM’s IP. In essense, Qualcomm is suggesting that Nvidia could in the future leverage higher licensing fee, especially from competitors for ARM’s IP. While this could potentially be true, Qualcomm doesn’t really have the best track record with respect to good licensing practices. The mobile SoC manufacturer has been time and again been called out for its unfair licensing practices, given its monopolistic hold on the mobile SoC market. This was one of the reasons why Apple and Qualcomm went to court a few years ago, a legal battle.