The acquisition of ARM by Nvidia has fallen through, meaning that ARM remains neutral, but this failed acquisition may now see up to 1,000 jobs being lost in an effort to reduce operational costs. Why did the ARM acquisition fail, what does this mean for the potential job losses, and does this suggest that ARM is showing signs of failure?

Why did the acquisition of ARM by Nvidia fail?

Ever since Nvidia made its intention to acquire ARM public in September 2020, countless engineers, companies and even governments voiced their strong opposition to the deal. What was supposed to be a smooth purchase with a few press releases here and there quickly turned into hit pieces against both ARM and Nvidia, YouTube videos describing the deal in-depth, and articles that warned of impending doom should the deal be successful.

While this doom and gloom from the engineering community may appear to be somewhat exaggerated, many valid points were made. One of the biggest concerns with ARM being purchased is that of all processor technologies in widespread use, ARM is one of the few (if only) available to any and all customers. So long as a customer can purchase the license fees, they are allowed to incorporate ARM CPUs into their silicon designs. This factor makes ARM a neutral ground that is not influenced by any of its customers or governments.

But the acquisition of ARM by Nvidia would make ARM answerable to Nvidia, which primarily produce graphics processors. These graphics processors are highly dependent on the CPU architecture they work with, which would most likely lead to Nvidia manipulating ARM development to favour their technologies. It would also give Nvidia unfair access to next-generation ARM technology that is not currently in the public domain, thereby giving Nvidia a competitive edge over its competitors.

Another problem faced by ARM if owned by Nvidia is that Nvidia is a US company, which would mean that ARM would have to conform to US regulations, including trade restrictions with countries such as Russia and China. Overall, the acquisition of ARM would see it lose its neutrality, accessibility, and fairness amongst its many customers.

ARM announces staff reductions in the wake of the failed deal

While the industry is mostly happy with the deal's failure, ARM is not exactly pleased with the situation and has now announced that it will be looking to cut up to 1,000 jobs. While ARM is predominately a UK-based company, it has staff worldwide with a total estimated number of employees of 6,500, with 3,000 of those being in the UK. If 1,000 jobs are cut worldwide, that would be a reduction of staff by 15%, which would be significant.

According to ARM, the potential reduction comes from increasing efficiency and reducing spending, but this could be in anticipation of ARMs plan to go public. This increase in profit and revenue would give investors the impression that it is a more valuable company and therefore increase its share price.

Does this mass-redundancy suggest a failing company?

Whether ARM is failing or not is unclear, but the reduction in staff does suggest that there could be internal trouble. If the reduction of staff is just for the sole purpose of increasing the valuation of ARM in time for an IPO, then one must wonder who exactly will be made redundant?

Engineers are essential to the design of new architectures and features, so eliminating this expertise would likely do more harm than good. Administrative staff could be removed while shifting their responsibilities onto existing engineers, but this would increase the pressure faced by engineers who cannot put their full focus on design. Thus, it would make sense that the redundancies will affect everyone equally, with departments being reduced in size proportionately.

However, ARM removing staff simply to improve their image with shareholders could be a very dangerous move. ARM has a reputation for being the innovator of RISC computing, not for unfair practices and profit maximisation. ARM being seen as a profiteering company may also see engineers lose faith in ARM and move towards other platforms such as RISC-V.

If ARM is removing staff as it is genuinely facing cost difficulties, this would explain why ARM was desperate to get the deal through with Nvidia. It may turn out that ARM is starting to feel the pressure from alternative processor technologies such as RISC-V, whose core does not require any licensing or royalties.

It is not clear if ARM is failing or just looking for increased profit, but what is clear is that ARM is desperate to become publicly traded, which is usually because a company either wants to grow or because it is struggling to increase its revenue.