UK to Investigate Nvidia Takeover of ARM
20-01-2021 | By Robin Mitchell
Since its announcement, there has been a lot of talk around Nvidia’s decision to purchase ARM. However, the UK’s Competition and Markets Authority have announced that they will investigate the situation before allowing such a takeover.
Nvidia Moves to Purchase ARM
In 2020, Nvidia announced to the world that it had talks with ARM and reached an agreement that would see Nvidia takeover ARM with a total value of $40 billion. While this is one of the world’s most expensive takeovers, the fact that the company being acquired was ARM is what had the industry both excited and concerned.
Nvidia’s desire to takeover ARM comes from the desire to combine ARM cores with Nvidia GPUs and AI accelerators to create highly efficient AI SoCs. Furthermore, Nvidia will continue ARM’s role as a neutral company, and continue to provide IP licensing to customers. The combination of Nvidia and ARM also allows customers to obtain IP cores that also integrate Nvidia products.
The widespread use of ARM cores in the industry also provides ARM with the opportunity to invest more into R&, and the customer base of ARM allows Nvidia to reach more customers. Since Nvidia does not create processors, there is little market overlap between the two, and thus the takeover allows both businesses to grow even more.
The takeover deal will see Nvidia pay SoftBank $21.5 billion in Nvidia common stock and $12 billion in cash (SoftBank are the majority shareholders of ARM Holdings). Nvidia may also provide SoftBank with a further $5 billion in cash or stocks, and ARM employees will receive $1.5 billion in equity.
Why are some concerned about the takeover?
The semiconductor industry has recently seen many large names, either merging or being bought out to create much larger companies. Such moves may result from companies recognizing the advantages of pooling resources with technology that is fundamentally shared.
For example, Intel purchased Altera in 2015, who specializes in FPGA and CPLD technology. The merging of the two businesses provides Intel with the opportunity to create processors with programmable hardware and develop high-end FPGAs with Intel cores.
AMD, Intel’s major competitor, has recently purchased Xilinx who also produces FPGAs and CPLDs. Just like the Intel takeover of Altera, this allows AMD to combine their CPU technology with programmable hardware. Furthermore, both companies can access a wider market and integrate their technology into more solutions.
However, some in the industry are concerned with Nvidia taking over ARM. Unlike Intel or AMD, ARM provides IP cores instead of physical products. The small footprint and low power nature of ARM processors have seen them integrate into billions of devices ranging from basic microcontrollers to full-fledged computers.
The neutral nature of ARM means that most companies can integrate ARM cores into their products without favouritism or prejudice. Like an open-standard, this allows products to be equally matched to a degree, all use the same instruction architecture, and vastly improve product design.
However, if a company such as Nvidia was to control ARM, they could potentially restrict licensing to chosen companies. The result of this would be an effective monopoly on the ARM world, whereby companies that do not compete with Nvidia can have access to an architecture that is effectively becoming the gold standard of microcontrollers.
While there are alternatives to ARM (such as RISC-V), these devices are still yet to be made widely available, and such cores will not be as strongly supported as ARM with regards to libraries, examples, and support. Thus, companies that compete with Nvidia will not use the products they have used in the past.
Competition and Markets Authority to Investigate the Deal
Recently, the Competition and Markets Authority (CMA) in the UK have announced that they will be investigating the takeover to determine the industry impact that it will have. ARM is a UK company and under UK authority, meaning that any decision the CMA comes to is final.
According to the CMA, they have asked for opinions from third parties in the industry to give their thoughts on the takeover, but such opinions will depend on who is asked. It is most likely that the biggest concern by the CMA is whether Nvidia upholds its promise to maintain ARMs neutrality in the semiconductor industry.
The CMA will also be looking for the degree to which Nvidia could upset its competition by increasing prices, reducing quality, or simply denying ARM technology access. Furthermore, the CMA will also consider the global impact as ARM is arguably one of the most important processor technologies. Of course, it’s not just competitors of Nvidia who are concerned; even Hermann Hauser, a founding member of Acorn and ARM raised his concerns about the takeover.
“NVIDIA has an opportunity to become the quasi-monopoly supplier of microprocessors to the world. This will give NVIDIA a dominant position in all processor segments and create another US technology monopoly.” - Hermann Hauser.
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