The deal between NVIDIA and Arm is finally settled.
According to the agreement, Nvidia will pay US$40 billion to Arm’s parent company, SoftBank, in the form of cash and stock, including US$2 billion in signing fees and US$1.5 billion in stocks provided to Arm employees.
▲ Picture from: NVIDIA
This transaction was exposed a few weeks ago. In late July, many media, including Bloomberg , said that SoftBank is considering selling part or all of Arm’s shares or taking the form of an IPO to ease the pressure of its own operating losses.
It is reported that at that time, SoftBank's contact was not only NVIDIA, but also Apple, but now, the former is obviously more interested in buying Arm.
Today, the transaction has reached the stage of confirmation by both parties. Earlier this morning, Nvidia released an announcement on its official website , stating that it has reached an agreement with SoftBank to earn Arm at a price of US$40 billion.
▲ Picture from: Saudi
If this transaction can be successfully concluded, it will become the largest chip company M&A in history.
Since then, the entire semiconductor industry structure will also undergo tremendous changes due to the change in the identity of Arm's parent company.
But there are still many thorny problems that Nvidia has to solve.
If you want to buy Arm, you just have money, not enough
The transaction between NVIDIA and Arm touched the nerves of many people. One of the most direct problems is:
"Why did Arm agree to be bought by Nvidia?"
This is related to Arm's business model. As a chip company, Arm does not participate in chip manufacturing and product launch, but will cooperate with other manufacturers in the form of authorization, including instruction set and chip architecture, to allow them to customize their own processors.
It is precisely because of this "technology neutral" position that Arm can grow and develop in the mobile device market, outputting tens of billions of chips every year, forming a near-dominant position.
At least all the phones and tablets you can buy now, and the Soc chips they are equipped with, basically use Arm technology.
▲ Each generation of Arm architecture will affect the core composition of smartphone processors in the next few months
But now, Arm has been bought by Nvidia, which is like adding an athlete status to the referee. Can he continue to serve as a referee?
This is not only a question that Nvidia needs to answer, but also a question that all companies such as Qualcomm, Apple, and Samsung that use the Arm architecture to design chips will question.
▲ Picture from: Wccftech
In order to dispel concerns, Nvidia stated in the announcement that Arm will continue to operate as a neutral in the future and will continue the original open authorization model.
At the same time, Nvidia CEO Huang Renxun also said that Nvidia has already spent a huge amount of money on this acquisition. "There is no reason to do things that abandon Arm customers."
However, whether other technology companies are willing to trust Nvidia's rhetoric is another matter.
Some analysts believe that this acquisition will not only weaken Arm's appeal as a neutral technology supplier, but also make Arm's identity as a mobile phone manufacturer, from a past partner to a potential competitor.
Once Nvidia re-enters the mobile chip industry and launches a more advanced Arm architecture chip, the title of "interest-related" will not be washed away anyway.
In the long run, in order to avoid suspicion, many companies may also invest in new free and open source architectures such as RISC-V, looking for a replacement for Arm.
Therefore, instead of letting the risk happen, it is better to erase the risk. No matter what the technology companies say about this acquisition, NVIDIA must be prepared to be questioned.
▲ Picture from: TechNadu
Regardless of industry factors, another key to the success of this transaction is how to obtain the permission of the regulatory authorities of various countries.
Four years ago, SoftBank was able to successfully buy Arm, not only because it only used Arm as an investment tool, but more importantly, it played as an "outsider".
But Nvidia is different. One chip company buying another chip company is a big taboo in the industry. It is not only the fair competition factor mentioned above, but also involves too many business decisions and core patent technology transfer. It is not the two companies that can come together if you wish.
▲ Picture from: CGTN
Let's talk about two examples of failure.
One is the acquisition of Qualcomm by Broadcom, a semiconductor company, in 2018. At that time, Broadcom's offer price exceeded 100 billion U.S. dollars, but when the two parties were about to reach a negotiation, the U.S. government intervened in it, saying that the acquisition had "risks of endangering national security and affecting the development of U.S. 5G technology." , Which forced Broadcom to abandon the transaction.
The other is that in 2016, Qualcomm hoped to acquire the Dutch chip manufacturer NXP Semiconductors for US$44 billion, but failed to obtain the support of the Ministry of Commerce of China, resulting in the failure of the transaction, and Qualcomm also paid US$2 billion in termination fees for this. .
▲ Picture from: CPI
Looking back, even if Nvidia has made it clear that it will retain Arm’s open license agreement, it is bound to be unable to escape the "concern" of antitrust agencies in various countries if it wants to complete the acquisition of Arm.
Nvidia has also stated in the announcement that the transaction still needs regulatory approvals from the United Kingdom, China, the European Union and the United States before it can be finalized. The estimated time is about 18 months.
▲ Picture from: IOB
At present, in order to obtain the recognition of Arm's UK, NVIDIA has promised to retain the Arm brand and its headquarters in Cambridge, and will establish a new artificial intelligence center there to provide a stable environment for technical research and training.
More uncertainty comes from China and the United States. Taking into account the current environment in which the two countries are at odds and the cell phone chip technology involved in Arm, will the Chinese Ministry of Commerce agree that a company originally under the jurisdiction of the United Kingdom and Japan will become an American asset?
This factor alone has cast a shadow over this transaction.
In the end, this transaction may also evolve into a long lobbying journey, which depends not only on Nvidia's capabilities, but also on the attitudes of various countries.
When Nvidia bought Arm, it was not Apple Samsung that was really hurt, but Intel
In an announcement on its official website, Nvidia explained the core reasons for acquiring Arm to the outside world.
"We hope to combine NVIDIA's existing artificial intelligence computing platform with Arm's huge ecosystem to create the most advanced computer company in the artificial intelligence era."
Some analysts believe that the reason why Nvidia took a fancy to Arm is because of the "complementarity" of the two businesses.
Among them, Nvidia is good at graphics processing technology and has a leading position in the GPU market; Arm has deep knowledge in CPU processor architecture and design. The cooperation between the two can be described as a strong combination and complementary advantages.
Of course, the two sides also have some common goals, such as server and data center business.
▲ Nvidia is developing rapidly in the server and data center market. Picture from: Nvidia
At present, nearly 90% of the processor share in this market is still controlled by Intel's X86 architecture. However, with the industry's increasing demand for deep learning and big data processing, the status of GPUs in data centers is also rising.
In addition, Nvidia's exploration of artificial intelligence has also made it popular in the server field, which also makes Nvidia the most powerful competitor to shake Intel's position in the data center.
According to Nvidia's financial reports in the past few quarters, the company's data center business is maintaining a momentum of rapid growth. The latest quarter's revenue performance even exceeded the video game business, becoming Nvidia's new "top-line department."
▲ Picture from: Forbes
In fact, before acquiring Arm, Nvidia also spent 6.9 billion US dollars to buy Israeli chip manufacturer Mellanox, also hoping to use the latter's Ethernet products to develop its own data center solutions.
In the past two years, ARM has also launched the Neoverse chip positioned in the server field, with the intention of opening up new development directions outside of the mobile device business.
Now that the business goals are the same, it is not surprising that the two parties will work together to become bigger and stronger.
▲ Snapdragon 8cx is a PC processor chip designed by Qualcomm based on the Arm architecture
On the other hand, on PC chips, Nvidia and Arm are also eyeing Intel. For example, Qualcomm's Snapdragon 8cx chip for PC manufacturers is based on the Arm architecture.
Today, after Apple announced that it would leave the Intel camp and switch to self-developed A-series chips based on the ARM architecture, the future PC processor market pattern is obviously not just a rivalry between AMD and Intel, but there will also be Arms. .
From multiple perspectives, the acquisition of Arm will not be directly affected by mobile phone companies such as Apple and Samsung, but NVIDIA’s old rivals: AMD and Intel.
▲ The popularity of Nintendo Switch also makes Nvidia's Tegra chip taste the sweetness
As for whether Nvidia will pick up the mobile phone chip business again, it is the most unlikely scenario.
Even Huang Renxun himself said , "Nvidia will not make chips for mobile phone manufacturers."
Nvidia has not been involved in the mobile phone market, but the Tegra series of processors launched in the early years have already lost the battle with Qualcomm. Now you can only find its existence in Nvidia's own Shield TV or Nintendo Switch console.
Today, NVIDIA is more inclined to do the same thing as ARM—"technical licensing" than to build its own chips and sell them to equipment manufacturers.
This is just like Arm will sell processor architecture and instruction set to manufacturers. Nvidia can also license the most proud graphics processing, AI and other technologies to other manufacturers, or even directly replace ARM’s existing technologies. The Mali series of GPU chipsets enhance the competitiveness and bargaining power of Arm chips in various fields.
The chip market is changing again
The Nvidia and Arm transaction has come to an end, but it is actually the beginning of a new round of market controversy. It is unknown in which direction things will develop next and whether there will be new interveners.
▲ The two co-founders of Arm said that Nvidia's acquisition of Arm will have a negative impact. Picture from: BBC
Just today when Nvidia made an announcement, the two co-founders of Arm, Hermann Hauser and Tudor Brown , stated that they hoped that Arm would remain "neutral" instead of being owned by a company like Nvidia to avoid possible conflicts of interest. .
However, Nvidia is very confident in its future and has expectations for the acquisition of Arm. You wouldn't even think that when SoftBank spent $32 billion to acquire Arm 4 years ago, it was just a company selling graphics cards worth about $30 billion.
▲ Nvidia has achieved rapid growth in the past two years and is no longer just a "graphics card company". Picture from: bloomberg
Four years later, with the position swap, Nvidia has grown rapidly and its market value has reached nearly 300 billion US dollars. It has not only got rid of its single identity as a graphics card manufacturer, but has become one of the world's most valuable chip manufacturers. Now it is even capable of buying Arm. , And then challenge the position of the industry's traditional boss.
New giants will be born soon, and it's time to get to know Nvidia again.
Source of title picture: EE Times Asia
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