The founder of the most valuable chip company in the world wants to continue fighting for the arm deal.
(Photo: Reuters)
Munich It’s a deal of superlatives: the US company Nvidia wants to swallow the British chip designer Arm for 40 billion dollars. This was announced by Nvidia in September last year. It is uncertain whether Nvidia boss Jensen Huang will ever be able to implement the project.
The biggest takeover of all time in the chip industry is meeting with increasing opposition from politics and authorities around the world. Now the American competition authority FTC has also announced that it will take action against the acquisition. Can the huge transaction still be saved?
We answer the most important questions:
What is bothering the American competition watchdog?
The Federal Trade Commission (FTC) wants to bring the takeover down with a lawsuit. The deal would hinder competition in the semiconductor industry, argues the agency. “We want to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said Holly Vedova, director of the Commission’s Bureau of Competition, in a statement on Thursday evening.
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What is special about arm?
The company does not make chips, but lives on license fees for its designs. The company is therefore sometimes referred to as “Switzerland of the semiconductor industry”. The Cambridge company earns a few dollars with every smartphone sold. Even more: the company has managed to advance into other areas from a professional for energy-saving mobile chips. For example, Apple recently replaced its long-term supplier Intel in its computers with its own semiconductors based on Arm designs.
The deal would significantly shift the balance of power in the semiconductor industry. Many chip manufacturers and IT corporations that have previously relied on Arm’s technology would in future be dependent on a competitor, i.e. Nvidia. Countless companies rely on Arm’s licenses and fear that the British could lose their neutrality step by step. Arm is currently owned by Japanese investor Softbank.
What does Nvidia expect from the takeover?
Arm is one of the “greatest technology companies the world has ever seen,” said Nvidia founder Jensen Huang when he announced the takeover. The aim is to grow together in the field of artificial intelligence. In a field in which computer performance will in future be provided directly in billions of devices instead of in data centers. Arm technology is made for this.
Nvidia is known for graphics processors for PCs, notebooks and servers. With these products playing an increasingly important role in artificial intelligence applications, Nvidia has risen to become a star in the industry. With Arm, Nvidia would now also play a crucial role in processors for cell phones, cars and supercomputers. Processors are the brains of every computer.
What are the concerns of competition authorities around the world?
The responsible British authority CMA spoke in the summer of “significant competition concerns” and therefore wants to take a close look at the deal. At the beginning of November, the British Digital Minister Nadine Dorries ordered an in-depth review of the transaction in order to investigate possible effects on national security. The European Union also has concerns. It is feared that the merger “could lead to higher prices, less choice and less innovation in the semiconductor industry”.
What are the reactions like on the stock exchanges?
Investors are excited about Nvidia whether the deal comes off or not. The share price has risen by around 150 percent since the beginning of the year. The company from Silicon Valley is by far the most valuable chip company in the world. “We’ve been convinced for some time that this deal is unlikely to be approved,” said Matt Bryson, an analyst with Wedbush Securities. “We also believe that the investment community broadly agrees.”
How is it going on now?
From the beginning, Nvidia boss Huang calculated a year and a half to complete the transaction. So he would only have time until the spring to convince the authorities. The entrepreneur has often emphasized that he would stick to Arm’s free licensing model. The 58-year-old is apparently not yet thinking of giving up, despite the time pressure.
The takeover will stimulate competition, the group said in response to the FTC decision. Nvidia will invest in Arm research and development and drive technical progress. All British licensees would benefit from this.
Huang has not yet commented on whether the deadline that he has set himself can be extended. But one thing is clear: Seller Softbank will not wait forever for revenue. An IPO of Arm would be an alternative to monetize the stake.
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