NEWS ANALYSIS NVIDIA ARM ACQUISITION
The news that the US software company
Nvidia is to acquire Arm from Softbank, in
a deal valuing the UK company at $40 billion,
has triggered calls from politicians, the
science and technology workers’ union and
Arm co-founder Hermann Hauser for the UK
government to intervene in the proposed sale
and use its powers to block it.
Mike Clancy, Prospect general secretary,
warned that, “This government has made
much of its industrial strategy and ambition
to make the UK a superpower in science and
technology, but that cannot be achieved if
the fate of companies like Arm is left to the
market alone to dictate.”
Hermann Hauser, Arm’s co-founder, was
brutal when questioned by the BBC and
described the sale of Arm as an “absolute
disaster for Cambridge, the UK and Europe”.
Not only did he warn of job losses in
the UK, but said that Nvidia would end
up destroying the UK firm’s business
model which he described as being, “the
Switzerland of the semiconductor industry.”
The model has enabled the company to
deal with over 500 licensees, most of whom
are competitors of Nvidia, said Hauser.
“The reason why ARM has a 95% market
share of mobile phones in the world is
because there’s a lot of competition between
those 500. If this is now done by a single
company, there is a monopolies problem.”
That’s a big risk for Arm, whose
independence has been critical to its
success. If that is undermined then it could
be vulnerable to the likes of RISC-V.
Calista Redmond, CEO of RISC-V
International highlighted exactly that when
she told New Electronics that, “RISC-V is
free and open so no single entity controls
Deal raises serious questions
WITH CONCERNS OVER NVIDIA’S ACQUISITION OF ARM, BOTH COMPANIES HAVE
TRIED TO CALMS FEARS ABOUT THE PROPOSED PURCHASE. REPORTS NEIL TYLER
the technology, meaning that everyone can
help to shape this rapidly evolving frontier of
computing.”
With the backlash underway, both Nvidia
and Arm have attempted to play down
worries and in a presentation to analysts
and journalists said that the company’s
independence and business model wouldn’t
be affected.
According to Arm CEO Simon Segars, “We
will maintain our neutral business model, and
“We want to retain
the brand and strong
brand identity of Arm
and expand its base in
Cambridge.”
Jensen Huang
will keep a level of independence.”
Nvidia CEO Jensen Huang said that his
firm had “just started talking” to the UK
government about the deal, and highlighted
plans for a significant investment in ARM’s
British operations including the setting up of
an AI Centre of Excellence in Cambridge.
However, the company hasn’t, as far
as we know agreed to any enforceable
undertakings regarding the location of Arm’s
headquarters or whether it plans to retain its
2,700 strong workforce.
“We want to retain the brand and strong
brand identity of Arm and expand its base in
Cambridge. We want to grow Arm and make it
become even greater,” said Huang.
Commenting on the announcement Mark
Lippett, CEO, XMOS said that the signing of
the agreement was seismic. “Potentially it
represents a moment of the chickens coming
home to roost for many manufacturers.
Contrary to established business wisdom
that businesses should retain control of
their strategic assets, the chip industry has
been content to divest itself of processing
technology and rely on licensing ARM
technology.
“Arm’s IP is now in the hands of a
competitor, rather than a strictly neutral
party, and changes the calculation entirely.
Although Nvidia has promised to retain
an “open-licensing model and customer
neutrality”, business-as-usual seems
an unlikely strategy for the largest Arm
licensees. Indeed, I believe it is a massive
wake-up call for the whole sector.”
According to Lippett some Arm customers
are likely to pivot to other licensed cores -
RISC-V, for example.
“However, you could argue that licensing
another processor from another company is
jumping out of the frying pan and into the fire.
Some chip companies may decide to retake
ownership of their processor architectures,
and while the cost of doing so is significant,
this announcement might make them
feel that it is perhaps the only truly ‘safe’
choice.”
Softbank has made a handsome $8bn
profit ‘flipping’ Arm, after buying the company
in 2016. Perhaps that was the bigger tragedy
when it comes to Arm and simply highlights
the UK’s attitude towards mergers and
acquisitions, and the preference among
investors for making a fast ‘buck’.
Some analysts have argued that Nvidia’s
acquisition could prove beneficial to Arm
and as Huang said, “by uniting Nvidia’s
AI computing capabilities with the vast
ecosystem of Arm, we will be able to expand
AI computing to every corner of the globe.”
If Nvidia can, or is forced by the UK
government, to enter into legally binding
commitments then this deal could work, but
as a number of commentators have said,
‘let’s hear the sums and the timetable for
delivery’
“Whatever happens, this announcement
has forced a major rethink of one of the
key assumptions that so much of the chip
business has been built on for at least the
last 20 years,” said Lippett. “Wherever we go
next it will not look like what we have today.”
10 22 September 2020 www.newelectronics.co.uk
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