NVIDIA is officially buying Arm for $40 billion

Joanna Estrada
September 15, 2020

In an open letter to employees, Nvidia CEO Jensen Huang confirmed the rumors that the company is indeed acquiring British based chip designer Arm.

Nvidia, the biggest US chip company by market capitalization, has agreed to buy Arm from Japan's SoftBank Group Corp., prompting the office of British Prime Minister Boris Johnson to say it would scrutinize the deal and act if necessary.

Arm NVIDIA cores and GPUs. "For Arm's ecosystem, the combination will turbocharge Arm's R&D capacity and expand its IP portfolio with NVIDIA's world-leading GPU and AI technology. Joining forces with a world leader in technology innovation creates new and exciting opportunities for Arm".

Regulators in the USA, U.K., China, the European Union will need to approve the deal, which will need about 18 months to complete.

Under the terms of the transaction, Nvidia will pay to SoftBank a total of US$21.5 billion in stock and US$12 billion in cash, which includes US$2 billion payable at signing.

That $40 billion purchase price also includes $1.5 billion in equity compensation for existing Arm employees, which now number more than 6,000 according to the company.

Shares in SoftBank rose 9% in early trading in Tokyo, buoyed also by reports that executives were exploring the possibility of taking the Japanese tech conglomerate private. On the other, Nvidia and ARM were valued roughly equivalently in 2016, while today Team Green has overtaken Intel to become the world's most valuable chipmaker. That stake will be likely just a bit shy of 10% of the company.

Nvidia's most recent quarterlies reveal data centre stuff is now its biggest single segment, overtaking its traditional patch of graphics chips for computers.

Softbank's founder Masayoshi Son described the firm as being a "crystal ball" that would help him predict where tech was heading. But if the deal goes through, NVIDIA will be both competing with chip companies like Qualcomm, and licensing its designs to them.

"I expect Nvidia to give commitments to maintain the intellectual property investment and leadership", said Mr. The company will also build an AI supercomputer in Cambridge using Arm CPUs. The heavy Nvidia stock component of the deal will see SoftBank returning as a major investor in the company. When the deal closes, Nvidia will own a minority. "We look forward to supporting the continued success of the combined business". But that will not have any effect on ARM's current licensing model. Up until now, ARM has agreed to abide by USA trade restrictions with China despite not being a US-owned company. It also remains to be seen how many of Arm's 3,000 United Kingdom -based employees would retain their jobs once the deal is done. But while Nvidia buying ARM may not be a goal of the government, it still changes the balance of power across the semiconductor industry. Those two companies are among Arm's biggest customers.Even without a presence in mobile, Nvidia's value has soared in the past decade. Its energy-efficient designs dominate the smartphone sector, with its licensees including Apple Inc. shipping 180 billion chips to date. "Nvidia has a mountain to climb in securing regulatory clearance. This process would be damaging to all parties and the uncertainty alone would hurt Arm regardless of the outcome".

Other reports by Click Lancashire

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