Nvidia’s arm deal sparks a quick reaction in the chip industry

SAN FRANCISCO / SHANGHAI / SEOUL: Nvidia Corp’s $ 40 billion deal to acquire Arm Ltd from SoftBank Group Corp is likely to meet strong opposition from Nvidia’s chip industry rivals, analysts say, with whispers of protests emerging in South Korea and China within hours of the announcement of the deal.

Arm has unparalleled scope as a provider of designs and intellectual property to most of the global semiconductor industry, licensing its technology to clients such as Intel Corp, Qualcomm Inc and Samsung Electronics Co Ltd, which increasingly compete with Nvidia. .

Arm’s open approach to licensing its designs to all stakeholders has turned the 160 billion chips sold based on its technology into a huge ecosystem of devices, from smartphones to smart toasters.

The Nvidia deal would put Arm under the control of a US-based fighter amid a battle between the United States and China, which is racing to develop a national semiconductor industry as US officials seek to slow its rise.

Geoff Blaber, vice president of research for the Americas at CCS Insights, said the deal “will rightly face significant opposition” from Arm’s clients.

“An acquisition by Nvidia would be detrimental to Arm and its ecosystem,” said Blaber. “Independence is critical to Arm’s continued success and once it is compromised, its value will begin to erode.”

Nvidia CEO Jensen Huang and Arm CEO Simon Segars told Reuters in an interview that Nvidia will retain Arm’s UK headquarters, which exempts it from many US export control laws. , and the open license model.

Huang also said that Nvidia will expand the model by licensing some of Nvidia’s designs, including its graphics processing unit, or GPU technology, through Arm’s silicon partner network. In theory, that move would allow those companies to compete with Nvidia.

Nvidia “went to great lengths to emphasize that Arm will continue to act as a neutral vendor and should not interfere with any of Arm’s licensing efforts, even if some Arm customers compete with Nvidia,” said Linley Gwennap, principal analyst at The Linley Group. .

But the deal immediately sparked skepticism in the hours after it was announced.

“China is going to hate it,” said a Chinese chip executive, noting that US companies working with Arm to create server chips would likely have a harder time selling in China if Arm had a US parent company.

South Korean chip industry officials and experts said that Nvidia’s purchase of Arm would intensify Nvidia’s competition with Samsung, Qualcomm and others in autonomous cars and other future technologies, while raising concerns that Arm could increase license fees for competitors.

“Arm customers can try to find alternatives to Arm in the long term,” said a source from the Korean chip industry.

Park Jea-gun, director of the Korean Society for Semiconductor and Display Technology, said the move marks an attempt by Nvidia to make an even deeper foray into the automotive chip market, where driverless cars are set to take off and on. where Samsung and Qualcomm is making great efforts.

“A formidable competitor will emerge in the automotive processor chip market,” Park said.

Blaber of CCS Insights said the Nvidia deal could also push chip companies toward RISC-V, an alternative open-source technology that is backed by a nonprofit foundation but not controlled by any entity.

A source at a US company using Arm designs said the move would likely accelerate an industry shift already underway from Arm designs to RISC-V. “This will only intensify that,” said the person familiar with the matter.

(Reported by Stephen Nellis in San Francisco, Josh Horwitz in Shanghai, and Hyunjoo Jin in Seoul; edited by Greg Mitchell and Richard Pullin)