ITP Techblog

A bid by US computer chip giant Nvidia to buy major UK-based rival Arm has been scrapped as regulators all over the world raised concerns about the implications of the deal for the global chip market.

The US$40 billion acquisition of ARM by NVIDIA was originally floated back in 2020 and immediately met a flurry of questions from regulatory bodies as well as Arm customers worried about what it would mean for prices and access to the technology. 

Between them, NVIDIA and ARM's processing units feature in the majority of laptops, tablets and smartphones sold around the world. In 2020, Apple undertook a major switch from Intel to ARM for the chips that power its Mac computers as well as iPhones and iPads.

Combining NVIDIA with ARM, which is owned by Japanese conglomerate Softbank Group, would have seen the biggest merger in the history of the computer chip industry and one that would have changed the power dynamics of the market forever. Concerns over semiconductor supply chain issues created by the pandemic also highlighted the need for more diverse and distributed sources of computer chips.

"The whole point about Arm was always that it was the Switzerland of the semiconductor industry, dealing very even-handedly with all of its 500-plus licensees. That wasn't lost on the regulators in the UK, the U.S., EU and China," Hermann Hauser, a founder of Arm, told Reuters.

The idea of Arm switching to US ownership was particularly alarming to China's regulator. The US and China have been engaged in a high-tech trade war that has seen companies from both countries added to trading blacklists. Having the supply of Arm technology cut off to Chinese device makers would be devastating for the Chinese electronics industry. 

Arm going public - again

Softbank now gets to keep a non-refundable US$1.25 billion deposit NVIDIA paid it as part of the merger plan and will instead undertake a public listing of ARM, which was previously listed on London Stock Exchange. NVIDIA has licenced Arm infrastructure for its Tegra CPUs (central processing units) for years and will likely continue to do so. 

The deal's failure is a major blow for Nvidia's expansion plans. The chipmaker has been riding high with a ballooning valuation during the pandemic that actually served to inflate the value of the deal to around US$80 billion. But its share price remained largely unchanged yesterday with the market already having priced in the impact of the deal unravelling - rumours began circulating last month that it would be called off.

With Arm's leadership in chips for smartphones and tablets and Nvidia's strength in graphic processing units, the merger of the two was seen as an opportunity to challenge the rapidly growing market for server chips, currently dominated by Intel. Now Nvidia and Arm will have to figure out how to realise that aim through more conventional partnerships, while electronics makers across the world breathe a sigh of relief that they won't be faced with dealing with two giants, Nvidia and Intel, for most of their chip needs.