Nvidia Calls Off Arm’s Acquisition Deal

SoftBank and Nvidia have announced their decision to call off efforts to acquire UK-based computing technology company Arm. The deal came to an unfruitful end following lingering scrutiny that has followed the deal since it was conceived.

Arm said it is now exploring a public offering in lieu of the acquisition, pushing for an IPO to happen in the next 12 months.

In December, the Federal Trade Commission (FTC), filed a lawsuit to halt the acquisition following a barrage of petitions from players in the industry. The argument has been that the deal will hurt market competition.

“The proposed vertical deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips,” the FTC had said in an announcement.

After calling it quits, Arm’s CEO Simon Segars announced that he is resigning his position effective Monday, with Rene Haas, the president of Arm’s IP group taking over his role.

In the third quarter of 2020, SoftBank reached a $40 billion agreement with Nvidia for Arm’s acquisition, but that triggered a wave of protests by Arm’s customers, including Apple, Samsung, Qualcomm, Advanced Micro Devices and Intel. The companies were worried that the deal would limit their access to Arm’s instruction set among others, because the acquisition would give Nvidia control over a critical supplier that gives licenses of essential chip technology to industry players, including China’s Huawei and Amazon.

In a petition early last year, Qualcomm and others told the FTC, the European Commission, the UK’s competition and Markets Authority and China’s State Administration for Market Regulation that the deal will impact their businesses.

Arm has earned the name ‘Switzerland of the industry’ because it is not a competitor in the semiconductor industry, rather it licenses chip designs and related software code to all comers. The concern is that if Nvidia, a player in the chip industry, acquires Arm, it could limit its rivals’ access to these technologies or raise the cost of products.

Haas acknowledged that the deal finally collapsed on Monday, but explained that it has nothing to do with the leadership change which he said started earlier.

“While we are disappointed that the acquisition didn’t go through, we are, at the same time, very excited about our prospects going forward and can’t wait to get this next chapter started,” he said. What exactly that’ll look like, Haas wouldn’t say just yet, but he noted that the company will continue its efforts to push into the CPU and GPU market, as well as continue its efforts in the AI space. “Continuing what we’ve been doing and executing on that is going to be really important, because we’ve demonstrated a recipe on how to grow the business and we definitely want to continue that,” he said.

Nvidia dominated the GPU and AI accelerator market and also owned the IP, the chips that power virtually every smartphone and IoT device. Acquiring Arm would have created a monopolistic market that may heighten Nvidia’s dominion and also increase cost.

For the deal to be approved in the future, Invidia and Arm may need to review it. Nvidia CEO Jensen Huang hinted on a possibility of a deal in the future.

“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come. Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm. The significant investments that Masa has made have positioned Arm to expand the reach of the Arm CPU beyond client computing to supercomputing, cloud, AI and robotics. I expect Arm to be the most important CPU architecture of the next decade,” he said in a statement.