acquisitions
Purchase of the chip designer Arm by Nvidia collapsed
Nothing will come of the takeover of the chip designer Arm by the graphics card specialist Nvidia. Photo: Andrea Warnecke/dpa-tmn/dpa
© dpa-infocom GmbH
The British company Arm is behind the architecture of almost all smartphone processors. This essential is now torpedoing its sale to graphics card giant Nvidia. Now there are other plans.
The billion-dollar deal to take over the chip designer Arm by the industry giant Nvidia failed due to resistance from competitors and competition watchdogs. Japanese Arm owner Softbank is now planning an IPO instead.
Chips based on the ARM architecture are found in almost all smartphones. It was therefore feared that Nvidia could use this to expand its own market position. The graphics card specialist always rejected this, but still encountered strong opposition.
In their announcement on Tuesday, Nvidia and Softbank cited regulatory challenges as the reason for the abandonment. At the beginning of December, the US government basically dealt the deal the deathblow by suing the takeover. The American trade authority FTC argued at the time that the merger could slow down innovations.
Takeover planned for a long time
In September 2020, Nvidia started the purchase of the British company, which was worth around 40 billion dollars at the time. With the price increase of the Nvidia share, the value was twice as high in the meantime. The stock slipped from its highs following the US lawsuit. However, the deal still weighed in at over $60 billion.
Apple and Samsung, among others, are developing the processors for their smartphones based on the arm designs. The chip company Qualcomm, with whose chips many Android phones run, uses it.
The ARM architectures prevailed in smartphones against chip systems from the semiconductor giant Intel – partly because they use less power. Now, chips based on Arm designs are also being used in data centers, and Apple is using them in its new Mac computers.
Remained largely independent
As the owner, the Japanese technology group Softbank did not shake Arm’s independence. In view of the planned takeover by Nvidia, however, there has been unrest in the industry for some time. Some ARM customers feared that the American graphics card group might have an interest in dovetailing future ARM architectures better with its own products – which would worsen their competitive position. Nvidia always rejected such fears.
The ARM IPO is scheduled to take place in Softbank’s upcoming fiscal year, which will run until the end of March 2023. Softbank is said to have considered a share placement before the Nvidia deal. However, some industry experts have doubts about Arms’ prospects on the capital market. Because the company is not a gold mine, despite its outstanding importance: Poor is considered profitable, but the business model, in which licenses for architectures are sold to chip developers, keeps the income manageable.
Fascination quickly cooled
Softbank bought Arm for $32 billion in 2016. Softbank boss Masayoshi Son was fascinated by robots at the time and focused on expanding the business – but the ambitions quickly cooled. In the event of an IPO, Arm should not return to the British stock exchange floor, but rather try his luck in the USA, wrote the “Financial Times”, citing informed people.
At Arm, the collapse of the Nvidia deal was followed by a change in leadership. Long-time boss Simon Seggars will be replaced by Rene Haas, who has brought ARM architectures to chips for cars and data centers in recent years, among other things. Before joining Arm in 2013, Haas also worked at Nvidia for several years.
Softbank and the Vision investment fund set up by the Japanese conglomerate are now keeping $1.25 billion that Nvidia had already paid in advance. Softbank can use the money well: In the last quarter, profit fell by a good 97 percent year-on-year to 29 billion yen (220 million euros). Softbank’s balance sheet has always been heavily dependent on the valuations of the many tech companies in which it and the vision fund have stakes.
It is not the first time in recent times that a large chip deal has been shattered by opposition from the authorities. In 2018, for example, then US President Donald Trump stopped Broadcom’s attempt to swallow Qualcomm for $117 billion, citing national security. Qualcomm, in turn, was planning to buy the European chip specialist NXP for over 40 billion dollars, but also gave up in 2018 after the green light from Chinese competition authorities failed to appear.