Nvidia reported in 2020 that the California-based technology company was planning to acquire ARM Ltd. which is one of the leading chipmakers in the industry. SoftBank, the owner of ARM Ltd. was all set to go on with this transaction of about $40 billion, which it had previously purchased in the amount of $32 Billion. However, recent reports strongly suggest that Nvidia may be backing off from this deal.
The acquisition was supposed to happen by September 2021. However, ever since then there has been no announcement from any of the companies. According to Bloomberg News, which reported this change of plans, Nvidia is slowly and “quietly” planning to abandon this deal.
According to Bloomberg, Nvidia has already started informing its partners that the deal is not to be done. Even SoftBank is rethinking the deal and actually considering putting ARM for initial public offering or IPO.
The deal was first announced in September 2020, which would have been the biggest acquisition in the technology sector. As it would happen, the immediate and long-term results of the deal announcement were not in their favor.
To begin with, both the UK government and US Federal Trace Commission or FTC have found problems with this transaction. While the UK fears national security to be compromised, FTC filed a lawsuit because Nvidia could get an unfair advantage if it managed to acquire control of ARM Chipset. Similarly, ARM has a venture with Hopu Investments in China, which can create another obstacle for the acquisition.
ARM is also one of the best chipmaking companies and is considered a “crown jewel” for the UK’s tech industry. It produces about 95% of the energy-efficient chip architectures used in smartphones all around the world. Just in China, the chips designed follow ARM’s architecture. The earning is automatically dependent on the royalties that manufacturers pay.
All leading tech companies, such as Microsoft, Google, and Intel are ARM’s customers. According to Bloomberg’s reports, the three along with Qualcomm and Amazon have been working to stop the deal from happening. If Nvidia were to acquire ARM, it would give the company an unfair advantage in the tech industry. Since ARM provides its services to all the tech companies, anyone Tech company owning it would create an imbalance in the free market.
If reports are to be believed, the companies themselves are divided on this matter. There are sects in both Nvidia and SoftBank who want this transaction to go through while others are not in favor of it at all. At the same time, some want ARM to go up for IPO in the public as soon as possible. This complicates the deal tenfold and makes the possibility of Nvidia dropping ARM more concrete.
When asked Nividia, ARM, and SoftBank for their statements on the matter, each replied with the hopeful view that the acquisition will still come to fruition. ARM even referred to the statement released by Nvidia, where it expresses that the acquisition would actually “boost competition”. Unfortunately, the chances of it look real slim.