NVIDIA’s $40 Billion Acquisition of ARM Fails, Preparation Underway To Abandon Deal
Back in September 2020, NVIDIA announced that they were going to acquire ARM for $40 billion. If this deal were to go through, it would’ve become the biggest ever in the semiconductor industry, and one of the biggest acquisitions in history. However, this deal faced immense scrutiny from regulatory bodies around the world, all of which pressured NVIDIA to back down from this deal.
It seems like the severe backlash has taken its toll on NVIDIA as Bloomblerg reports that the company is silently retreating to abandon the acquisition. Apparently, NVIDIA has no hope that the deal will be approved before March 2022 (the deadline), or ever for that matter, so its telling its partners to not expect it go through. On the other hand, ARM Holdings, which is currently owned by SoftBank, is preparing for an Initial Public Offering (IPO) to go public in order to increase liquidity.
*NVIDIA IS SAID TO QUIETLY PREPARE TO ABANDON TAKEOVER OF ARM$NVDA
— *Walter Bloomberg (@DeItaone) January 25, 2022
The likelihood of NVIDIA and ARM’s merger is so thin that it could be used as a fine line between coping and insanity. The US Federal Trade Commission (FTC) sued to block this deal in December of 2021 which was a major blow when it comes to gaining regulatory approval. China also said that if the deal gets approved in every applicable nation, it will block it in China and prevent it from going through. Similarly, EU is also investigating the deal at the moment with their current stance being akin to those of the FTC and China.
Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals. – Holly Vedova, FTC Bureau Director
Why ARM matters so much
For the uninitiated, the reason this deal faced such unprecedented criticism from authorities and rivals alike was because of the role ARM plays in the tech sector. ARM is essentially everywhere. It powers the smartphones of today, whether that be an iPhone or an Android, there’s a 90% chance that it has got an ARM processor inside. Companies like Apple who develop their own SoCs use ARM-designed cores as the foundation.
On top of that, ARM also owns the Reduced Instruction Set Computing ISA which dictates how software can interact with hardware through the CPU. It’s essentially the interface between the two that defines what the processor is capable of and what it can do. All ARM processors use this, so Samsung, Apple, Xiaomi, Google and many more who rely on ARM, also rely on this instruction set.
Therefore, NVIDIA’s takeover of ARM was poised to become an extremely berating act the moment it was announced. It would give the company absolute control over all of ARM’s assets, thus affecting the neutrality that ARM has worked so hard to maintain all these years. This would, in turn, affect rivals who rely on ARM for their processors as NVIDIA could cut off or favor any one it wished to, completely destroying the balance of the market.
So that begs the question: why? Why does NVIDIA want ARM when it itself is the second biggest semiconductor company in the entire world, only behind TSMC. Well, the answer is simple. NVIDIA only makes GPUs, apart from a couple of AI projects here and there, graphics is what they’re known for. But, in today’s atmosphere where its biggest competitors—AMD and Intel—possess a portfolio of diverse GPUs and CPUs, NVIDIA doesn’t want to feel left out. They want to develop their own CPUs.
The bottom line
But, all of that is going out the window now since this deal is supposedly as good as dead. Officially, NVIDIA and SoftBank are still hoping that they get approval from the appropriate bodies but it’s unlikely that’s going to actually happen, but that’s their public bottom line for now. So, as things stand right now, NVIDIA will owe $1.25 billion to SoftBank as the breakup fee, which has already been paid as a down-payment earlier.
With that, NVIDIA has internally started to prepare for the abandonment of this deal, tying off loose ends and whatnot. Unless some miracle happens that changes the course of action, we should be getting official confirmation from the companies really soon about the fallout. Regardless of how far away that announcement is, one thing is certain: NVIDIA has just lost an ARM.