The reason why the Nvidia - ARM merger collapsed

 The reason why the Nvidia - ARM merger collapsed

Nvidia was unable to acquire chip maker ARM due to major hurdles from the semiconductor industry and global regulators.

Both Nvidia and Softbank - the company that owns ARM - officially confirmed that they could not complete the biggest deal in the history of the semiconductor industry. The reason given was that "regulatory barriers prevent the completion of the transaction, despite the efforts and goodwill of the parties".

ARM - Nvidia is considered the sale of the century of the semiconductor industry, but it was not successful. Photo: Techcrunch

Nvidia - ARM is considered the chip industry's deal of the century, but it was not successful. Photo: Tech Crunch

Nvidia stated its intention to acquire ARM for $40 billion, of which $21.5 billion in stock, in September 2020. After 18 months, thanks to soaring shares, the deal could have reached $75 billion if completed. However, the merger did not happen.

'Dead' since it was first announced

ARM originated from the British company Acorn. SoftBank (Japan) bought this business in 2016 for $ 31 billion. Unlike other chip manufacturing corporations like AMD, Intel, Motorola or Hitachi, ARM only designs and sells chips instead of creating complete CPU and GPU chips. ARM architecture is licensed by many semiconductor companies, such as Apple, Samsung, and Qualcomm.

With its distinctive way of doing business, many analysts warn the deal risks "dead from the get-go", due to concerns about anti-competitive regulation and geopolitical tensions.

"ARM has always been the 'Switzerland' of the semiconductor industry and is providing chip design to more than 500 organizations and businesses. That's caught the eye of regulators in the UK, US, Europe and China. country," Hermann Hauser, one of ARM's founders, told Reuters.

According to Greg Roh, head of research at Hyundai Motor Securities in Seoul, the fact that a key chip architecture company like ARM "enters" the US through Nvidia is inherently unwelcome.

"The chip industry is going through a fierce battle. Countries try to compete to gain an advantage and are ready to block the sale if they see a disadvantage," Roh said.

Geoff Blaber, CEO of market analysis firm CCS Insight, said the deal was under great pressure from the start. "The failure of the deal is not too surprising. Finding a way to appease lawmakers, while maintaining the price of more than $ 40 billion is too big of a challenge," Blaber told the Guardian.

In September 2020, when the new plan was announced, Global Times assessed: "With the US-China tension and the US's suppression of a series of Chinese technology enterprises, if ARM falls into the hands of the US, the companies will Chinese technology companies will be put at a disadvantage in the market."

At that time, the site said that Chinese technology firms on the US Entity List, such as Huawei, would be completely excluded from chip production if using ARM designs. European businesses using ARM technology will also find it difficult to supply products to China, causing major disruptions to the supply chain.

In addition, some experts are concerned about ARM's neutrality if it is acquired by Nvidia. This resulted in the deal being subject to fierce scrutiny from regulators around the world and soon falling apart.

New direction

According to Fortune, the failed merger had almost no impact on Nvidia. However, this company is currently only strong in the GPU graphics chip segment, has not made great achievements in the CPU central processing unit.

In April 2021, the company announced plans to develop a dedicated CPU for the Grace data center, based on the ARM architecture. At that time, experts said that ARM would be a useful addition to Nvidia's ambitions.