One of Britain’s most successful tech companies, Arm Holdings, is being sold by its Japanese owners for $40bn (£31m) in a deal that could reshape the semiconductor landscape
Nvidia said Sunday it is acquiring chipmaker Arm from SoftBank for $40 billion. Arm will operate as a division of Nvidia and will remain headquartered in the UK, and, will “continue to operate its open-licensing model, while maintaining its global customer neutrality,” the company said. But the deal is still likely to face intense regulatory scrutiny.
SoftBank bought Arm in 2016 for $31 billion. The British company’s intellectual property helps power mobile device processors for companies including Apple, Samsung, and Qualcomm. Arm has likely only increased in value since the SoftBank acquisition, with Microsoft making an Arm-based Surface and a version of Windows for Arm, and Apple plans to switch future Macs to Arm-based chips.
Nvidia is the leading maker of GPUs, which Arm also designs, but other than its Tegra line of mobile chipsets used in devices like the Nintendo Switch, Nvidia doesn’t do much in the way of CPU design or mobile hardware.
Perhaps to underline that it intends to keep Arm a neutral provider of technology in the short term, the deal stresses that Arm will continue to be headquartered in Cambridge, UK and Nvidia say it will invest in building a new AI research center there. Nvidia is positioning the acquisition as setting up the next stage of AI computing. Both Nvidia and Arm see opportunities for growth in enabling AI software that can run on Arm’s chips from those on tiny smartphones to huge servers.
Speaking on BBC Radio 4 on Monday morning, he said any promises made on jobs were “meaningless unless they are legally enforceable”, pointing to the takeover of Cadbury by US company Kraft in 2010.
Founded in Cambridge in 1990, Arm specializes in microprocessors and dominates the global smartphone market. But its chips are also found in countless sensors, smart devices, and cloud services.
Arm licenses its technology to any company that wants to buy it and its customers include Apple, Samsung, and Qualcomm, which in turn use it in their devices.
This gives Nvidia control of technology from Arm that could be used to make its own central processor chips, doubling down on Nvidia’s strategy of buying up technologies in parts of the booming data center business where it does not currently play.
Nvidia’s deal would also put Arm under the control of a US-based combatant amid a trade cold war between the United States and China, which is rushing to develop a domestic semiconductor industry while US officials seek to stem its rise.
UK-based computer chip designer ARM Holdings is being sold to the American graphics chip specialist Nvidia.
Nvidia has promised to keep the business based in the UK, to hire more staff, and to retain ARM’s brand.
“But with the expiry about to happen and obviously the Brexit negotiations underway, it will be very interesting to see how this develops in the future.”
This appears to address concerns that British jobs would be lost and decision-making shifted to the US. Last week, the Labour Party had urged the government to intervene.
But two of ARM’s co-founders have raised other issues about the takeover.
Hermann Hauser and Tudor Brown had suggested ARM should remain “neutral”, rather than be owned by a company like Nvidia, which produces its own processors.
The concern is that there would be a conflict of interest since ARM’s clients would become dependent on business with which many also compete for sales.
Moreover, the two co-founders also claimed that once ARM was owned by an American firm, Washington could try to block Chinese companies from using its know-how as part of a wider trade clash between the countries.
“[That] means that if hundreds of UK companies that incorporate ARM’s [technology] in their products, want to sell it, and export it to anywhere in the world including China – which is a major market – the decision on whether they will be allowed to export it will be made in the White House and not in Downing Street.”
On the other hand, Relations between the EU and UK have deteriorated markedly over the course of the past week with the UK putting forward legislation that would be seen to override elements of the Withdrawal Agreement is signed with the EU late in 2019. The significance of the legislation can’t be understated as it would effectively see the UK breaching an international treaty, as well as ‘poisoning the well’ with the EU and diminishing the chance of a deal being struck.
“It may also be the case that it thinks the chances of a deal are slim – and so there is not much to lose from this brinkmanship,” says Hollingsworth.
Sterling bore the brunt of the market’s growing anxieties that a ‘no deal’ outcome to trade negotiations was looming, with the Pound-to-Euro exchange rate falling 3.72% last week, the Pound-to-Dollar exchange rate fell 3.62% while the Pound-to-Australian Dollar exchange rate shed 3.56%.
The EU last week gave the UK until the end of September to drop the contentious elements of the Internal Market Bill or they will sanction the UK. The nature of the sanctions is yet to be made clear.
However, Prime Minister Boris Johnson’s Government has as of yet shown no willingness to back down to the EU’s threats, although there are growing signs that a growing number of MPs from his own party are preparing to vote down the legislation.
The Brexit playbook of 2016-2019 suggested Sterling stands to benefit whenever Parliament is able to stand in the way of the Prime Minister and soften the potential outcome. If this does repeat, then the Pound might recover somewhat if the Government loses key votes on the Internal Market Bill.
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