Nvidia has been in talks for weeks to acquire arm from Softbank. The latest purchase price is over $ 40 billion, according to a Wall Street Journal report based on unnamed sources.
SoftBank privatized Arm for $ 32 billion in 2016. At the time, Masayoshi Son, CEO of SoftBank, said he was preparing for the Singularity, the predicted day when AI will collectively become smarter than humans. But SoftBank has gotten into a money crisis as it is losing billions of dollars during the pandemic and bad bets on Uber and WeWork.
There’s no question that arm is a valuable commodity as its licensees annually supply more than 20 billion chips for everything from smartphones to tablet computers to sensors for the Internet of Things. Apple plans to use ARM-based processors to replace Intel processors in future models of its Mac computers.
The question is, how open will Nvidia keep the ARM ecosystem if it can be successfully acquired. Nvidia was a strong competitor to competitors like Intel and AMD. Apple used Imagination Technologies to create the graphics processing components in its iOS devices, and it wasn’t a big customer for Nvidia’s graphics on the Mac side. Despite its existence, Nvidia has competed hard for a giant in the PC industry with sales of $ 13 billion (after twelve months) and a market value of $ 330 billion. The latter is higher than Intel’s $ 144 billion worth.
If the deal goes through, these big competitors will become Nvidia’s customers. For Nvidia it would make sense to treat Arm as an independent subsidiary and to continue open customer relationships with competitors in the processor business. Arm still has rivals like the royalty-free RISC-V architecture, which is increasingly being supported by companies fed up with Arm’s royalties.
The deal could secure Nvidia’s future access to processor technology. If Arm fell into the hands of rivals, Nvidia could be disfellowshipped. And it still competes fiercely with the likes of Qualcomm, Intel, and AMD. Nvidia would also get access to Arm’s engineering talent, which includes over 6,000 people. Nvidia itself employs more than 13,000 people. Owning Arm is kind of an insurance policy for Nvidia, especially if it doesn’t trust a company in control of the critical intellectual property for its AI and mobile processing efforts.
One of the other advantages Nvidia could take advantage of is the combination of its graphics chips with Arm’s processor technology. Intel and AMD have long been able to develop more integrated solutions that combine graphics and processor technology. Integrated graphics and processors from Intel hold the low-end PC market firmly, while stand-alone graphics chips from AMD and Nvidia occupy the middle and upper end of the market. AMD has also combined its x86 processors with graphics to create specific solutions for game consoles. Nvidia could try something similar as ARM processors are making headway in both servers and low-end PCs.
Apple could enter the bidding and acquire Arm when it comes to the property owned by Nvidia, which had a rocky relationship with Apple. However, Apple’s move could also result in tighter government scrutiny at a time when the company is already under antitrust investigation. And since Nvidia recently surpassed Intel’s market value, Nvidia can outbid Intel, which is developing its own high-end graphics.
In my last interview with Jensen Huang, CEO of Nvidia, I asked him about the purchase of Arm. He replied, “It’s just a rumor!”
Nvidia declined to comment. Arm has not yet responded to a request for comment.