Nvidia Needs to Convince Stakeholders to Close Arm Deal

Article By : Nitin Dahad

Over the last few weeks, several people in Europe had mentioned to me that discussions between Nvidia, Softbank and Arm were well advanced. It was Nvidia must now begin its campaign to convince industry and regulators that acqusition of Arm is good for all stakeholders...

Over the last few weeks, several people in Europe had mentioned to me that discussions between Nvidia, Softbank and Arm were well advanced. It was difficult to report on since most people close to the deal kept it very close, so there were very few factoids I could use. So instead I wrote a piece on why the acquisition of Arm by Nvidia made sense, based on both companies’ ambitions to rule the data center. Hence when the news finally came this week that Nvidia plans to buy Arm for $40 billion, it wasn’t much of a surprise. In Monday’s media and analyst call, Jensen Huang, founder and CEO of Nvidia, and Simon Segars, CEO of Arm, set out to tell the story that they will no doubt have to tell over the next 12-18 months as they look to clear all the regulatory approvals as well as ensure they can win the industry over. On the call, Huang said, “This transaction is very important for the technology sector and the U.K. Together we’re going to create the world’s premier computing company for the age of AI [artificial intelligence].” He added, “This is a once-in-a-lifetime opportunity for the two companies to create the most energy-efficient computing capability in the world. That’s the reason I was the highest bidder.”
Recommend NVIDIA to Acquire Arm for $40 Billion Could Nvidia Buying Arm Be an Ideal Match?
Nvidia and Arm will have to work hard on government relations as well as the industry, if they are to overcome some strong lobbying by two of the people who were instrumental in founding Arm, Hermann Hauser and Tudor Brown. They have been in the media regularly in recent weeks because of their concern such a deal would mean the U.K. losing its crown jewel of the technology industry, and that it would be moved to the U.S. This is a common scenario for European companies acquired by U.S. firms, who often end up having a key part of the company relocated stateside, apart from some key engineering or research and development jobs which may stay in the original European location. As the deal was announced, Hauser told news agency Reuters that this would spell disaster for Cambridge, the UK, and Europe. He said, “It’s the last European technology company with global relevance and it’s being sold to the Americans.” If this deal did happen, he said it would risk jeopardizing Arm’s position as the “Switzerland of the semiconductor industry” where it allows hundreds of companies such as Apple, Samsung and Qualcomm to develop their own chips using its architecture. He added that if the company’s British character and open business model could not be protected, it would be better for the Prime Minister Boris Johnson to back a flotation on the London Stock Exchange. Maybe the biggest carrot being offered to the U.K. to counter this is Nvidia’s intention to establish a new global center of excellence in AI research at Arm’s Cambridge campus. Nvidia proposes to invest in a state-of-the-art, Arm-powered AI supercomputer, training facilities for developers and a startup incubator, which will attract world-class research talent and create a platform for innovation and industry partnerships in fields such as healthcare, robotics and self-driving cars.
Nvidia proposes to establish a state-of-the-art AI research center and build an Arm-powered AI supercomputer in Cambridge, UK. (Image: Arm)
Huang said that as a result, “U.K. researchers won’t need to leave the country to work on AI. Cambridge will be Nvidia’s largest site in Europe. We have some of the finest computer scientists in the world in Cambridge.” He added, “We can’t wait to build on the foundations created by the talented minds of Nvidia and Arm to make Cambridge the next great AI center for the world.” Will this be enough to allay the fears of the British stakeholders? It really depends on how successful the lobbying is with government ministers, and whether the deal will be challenged in some way under some rule, such as the Competition and Markets Authority or on the grounds of national security. What about Arm’s neutrality? Assuming they get over this hurdle, Nvidia and Arm also need to convince industry on the ability for Arm to maintain its neutrality. On the media call, Segars was challenged about a statement he made four years ago, in which he said that its partners and customers valued Arm’s independence. So how has that changed now? He responded, “Our value is in the technology we have created. The intent is to operate with a level of independence that maintains this model.” He said that given the rumors milling around, he had fielded questions from various customers on this point. And then Huang added the fact Nvidia and Arm are still moving forward with the transaction “speaks volumes about how customers are responding”. Clearly the implication is that these customers have understood its plans or have not objected. But that wasn’t explicitly stated on the media call. In his letter to Nvidia employees, Huang stated, “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.” Huang covered many other issues that will need to be addressed as part of Nvidia’s campaign to close the Arm acquisition, which you can read here in our sister publication, EE Times. In this he covers why the combination of Nvidia and Arm was very pro-customer. On the possibility of Arm’s loss of neutrality enabling a loss of business to RISC-V architectures, he countered this saying they served different purposes, and that Nvidia was a very enthusiastic user of both Arm and RISC-V. He also said he was confident that the deal would go through, which meant that there was not really any contemplation of a plan B if the deal doesn’t go through.

Leave a comment