Why Some Chip Companies Are Expressing Concern and Others Support NVIDIA Acquisition of ARM
Ssemiconductors are no longer just a basic building block of technology. With devices of all kinds (like household appliances, vehicles, industrial equipment, etc.) turned into computers and connected to a network, chips are a commodity governing the development of almost the entire economy. . New advancements in chip technology and the kind of capabilities they can unlock are of interest to all kinds of industries, not just in technology.
that’s why NVIDIA‘s (NASDAQ: NVDA) pending the acquisition of ARM Holdings from SoftBank Group is of such interest. Many companies have expressed their views on the proposed merger, some against the deal, but others in favor. As a reminder, ARM is the patent holder and licensor of a wide variety of chip architecture designs and associated software code used to implement chips in a computer system. ARM claims that approximately 70% of all people on the planet use a device with an ARM-based circuit. Suffice it to say that a large and diverse number of organizations are customers, including NVIDIA itself.
The stakes are high, and NVIDIA’s acquisition of ARM could significantly alter the balance of power in the chip industry.
Image source: Getty Images.
The arguments of the prosecution
NVIDIA and ARM have said they are confident the merger will be completed by the end of the first quarter of 2022. At the moment, however, regulators around the world are looking into the matter. It seems to put the marriage in jeopardy, but it’s worth remembering that regulators questioning big deals like this are normal. Governments want to ensure that a merger does not create unfair market advantages. And the fact that ARM is a key licensor of chip technology in virtually the entire global economy adds to the burden on antitrust regulators. So they want to make sure they do this one right, especially in light of other giant tech deals (for example, Facebookthe purchase of Instagram and WhatsApp) being questioned after the fact.
But that hasn’t stopped some chip competitors from trying to amplify the wake-up call, and Qualcomm is the main one of them. Qualcomm, whose chip designs can be found in most smartphones around the world, said it was concerned NVIDIA would limit access to ARM’s chip licenses and keep ARM’s best patents for itself – even. Qualcomm has built its mobile chip empire with liberal use of ARM designs, and recently added that it would be open to investing in ARM if regulators blocked NVIDIA’s move. Alphabetis Google and Microsoft, also ARM customers, have expressed similar concerns regarding NVIDIA’s limitation of access to ARM.
For the record, NVIDIA has promised that’s not what it will do. He even said he would be prepared to sign legal agreements so as not to limit the access of other chip designers to ARM licenses. In fact, NVIDIA’s stated goal here is to inject its own technology (like its work on GPUs for use in AI) into ARM to give the entire industry a dose of innovation and deliver new options for customers. It’s logic. Intelligence is by far the titan that defines the industry here, with some $ 78 billion in annual sales (NVIDIA reported a relatively small $ 19 billion in the past 12 months), but NVIDIA-plus-ARM could give new choices for engineers and developers of electronic systems.
Although the tides of change are already pouring in, small businesses are crying foul. Interestingly, one of NVIDIA’s bitter opponents is British start-up Graphcore, which is working on its own competing chip designs made specifically for AI. NVIDIA is building an incredible momentum in the AI department. Keeping ARM independent could help small businesses like Graphcore stay competitive before NVIDIA can get too far ahead of the game.
In short, while there are concerns about NVIDIA’s offer for ARM and its potential long-term ramifications – namely, NVIDIA is accelerating its position as the dominant chip industry leader – voices against it. agreement may have their own agenda beyond mere concerns about purchasing ARM chip licenses.
Image source: Getty Images.
What the defense has to say
Besides NVIDIA and ARM themselves, some peers support this merger. Biggest company is just a chip design giant Broadcom. To be sure, Broadcom is currently facing its own antitrust settlement with the Federal Trade Commission (FTC), which has accused Broadcom of monopoly practices. Nonetheless, Broadcom is backing NVIDIA after receiving assurances that ARM technology will continue to be available to all industry players. Broadcom, by the way, is a major ARM customer.
Two other ARM clients – Marvell Technology Group and MediaTek – are also receiving support after allaying concerns that ARM will remain available on a non-discriminatory basis. MediaTek CEO said the chip designer believes NVIDIA and ARM could help bring “more competitive and comprehensive products to market.”
In other words, NVIDIA plans to supercharge ARM’s technology with new research and development that could create new winners in the industry. Some of the incumbents voicing their concerns could have the most to lose if the playing field is leveled and an ARM supported and funded by NVIDIA highlights new semiconductor designs and licenses.
As already mentioned, the winds of change are already blowing whether or not the ARM acquisition from NVIDIA is complete. This deal could meet with some opposition (or encouragement) in an attempt to slow or accelerate the pace of change, depending on what each player in the semiconductor industry has to lose or gain. .
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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Teresa Kersten, an employee of LinkedIn, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of its CEO, Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Nicholas Rossolillo owns shares of Alphabet (C shares), Broadcom Ltd, Facebook, Marvell Technology Group and NVIDIA. Its clients may own shares of the companies mentioned. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Facebook, Microsoft, NVIDIA and Qualcomm. The Motley Fool recommends Broadcom Ltd, Intel, Marvell Technology Group and Softbank Group and recommends the following options: long January 2023 $ 57.50 calls on Intel and short January 2023 $ 57.50 put on Intel. The Motley Fool has a disclosure policy.
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