Nvidia to Acquire Chip Designer Arm from SoftBank for $40 Billion

Nvidia and the SoftBank Group have announced a definitive agreement under which Nvidia will acquire Arm Limited from Softbank in a transaction valued at $40 billion in cash, stock, and future considerations.

Nvidia will pay $21.5 billion in stock, $12 billion in cash, and $2 billion at signing, and SoftBank could receive an additional $5 billion if Arm meets certain performance targets. Also, Nvidia will issue $1.5 billion in equity to Arm employees.

The two companies will have to jump through some regulator hoops before the deal can be finalized. They have to get approval, first from the United Kingdom, and then the United States, China, and the European Union. Industry watchers expect the deal to take as long as 18 months to finalize, though it has already been approved by the boards of SoftBank, Nvidia, and Arm.

U.K.-based Arm Holdings is a global provider of so-called silicon IP for devices. It doesn't make chips; it designs them, manages the instruction set, and creates new versions of the core architecture. It licenses all that to silicon designers and device manufacturers. Those companies are free to improve on the design and pair it with their hardware of choice.

The company's ARM CPU design is one of the most commonly used for the chips in mobile phones. The designs licensed by Arm are already used by Nvidia in its chips, and they are used by Nvidia's competitors, as well. Arm claims to have more than 1,000 technology partners currently using its licensed technologies.

Tokyo-based telco SoftBank bought Arm Holdings for $32 billion about four years ago, although the "undertakings" are yet to be completed in September 2021.

Santa Clara, CA-based Nvidia has grown in a few short years into a multi-billion-dollar company by marketing its graphical processing units (GPUs) to datacenter operators as the right silicon for processing the flood of data demanded by a new generation of AI-oriented applications.

If acquired by Nvidia, Arm Holdings will continue its research and development operations in Cambridge, U.K., Nvidia says, and Arm's open licensing model for chip designs will continue to be available. Nvidia promises to maintain "the global customer neutrality that has been foundational to [Arm's] success, with 180 billion chips shipped to-date by its licensees."

Needless to say, Arm designs will enhance an even wider range of Nvidia products, but now Arm partners will also benefit from "Nvidia's numerous innovations," the company said.

In the announcement of the acquisition, Jensen Huang, Nvidia's founder and CEO, underscored the value of the combination of his company's artificial intelligence (AI) computing platform with Arm's CPU designs to expand Nvidia's markets.

"Uniting NVIDIA's AI computing capabilities with the vast ecosystem of Arm's CPU, we can advance computing from the cloud, smartphones, PCs, self-driving cars, and robotics to edge IoT, and expand AI computing to every corner of the globe," Huang said.

However, Arm co-founder Hermann Hauser objected to the deal in an open letter addressed to the U.K. prime minister. Hauser insisted that three conditions be made legally binding: job guarantees for Arm employees in the U.K.; no preferential treatment for Nvidia over other Arm licensees; and the U.K. an exemption from the US OFAC regulation "so that U.K. companies are guaranteed unfettered access to our own microprocessor technology."

Hauser cautioned that if the deal goes through, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) will dictate where Arm's partners can sell their products, such as China. OFAC oversight, with the acquisition by Nvidia, would effectively diminish the United Kingdom's sovereignty, he argued.

"As the American president has weaponized technology dominance in his trade war with China," he wrote, "the UK will become collateral damage unless it has its own trade weapons to bargain with. Arm powers the smartphones of Apple, Samsung, Sony, Huawei, and practically every other brand in the world, and therefore can exert influence on all of them."

Instead of a sale to Nvidia, Hauser proposed that Arm should go public on the London Stock Exchange.

About the Author

Kurt Mackie is senior news producer for 1105 Media's Converge360 group.