NVIDIA on Monday has announced it is buying the world’s leading chip designer and technology provider, Arm Holdings, from SoftBank with a deal of worth around $40 billion. This will be the largest ever deal in the semiconductor industry. Out of the $40 billion, Nvidia will pay $21.5 billion in stock and $12 billion in cash. The UK based chip company will receive a $2 billion payment at signing and another $5 billion in stock or cash after Arm meets certain performance targets. 

The companies further announced that the Arm’s employees will receive an additional $1.5 billion equity in the shape of Nvidia stocks. SoftBank will maintain less than a 10% stake in Arm, and the later will keep its headquarters in Cambridge, England, as per the deal. 

The acquisition is way more important than what Nvidia is paying for. However, analysts believe the success of it depends a lot on how the GPU maker now balances the Arm’s neutrality. According to Bloomberg, the deal will also make Nvidia one of the bigger players in smartphone technology as Arm is at the heart of more than 1 billion smartphones sold annually. Its code and its layouts are used in chips that are a part of everything from home electronics to factory equipment. 

As Nvidia is headquartered in US, Arm in Britan, and SoftBank in Japan, the deal can prove to be quite complicated and take up to 18 months to complete official Nvidia press release states. Approvals are needed from regulation authorities in China, UK, EU, and US. Due to the rising tensions between China and the US lately, it will not be easy to get China’s approval. 

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What’s next for Arm clients?

Arm has a legacy of being a neutral company, which never competes; instead, it helps other chipmakers use its chips’ designs. After becoming a part of Nvidia, the million-dollar question remains: Would the broad range of its clients like Apple or Intel continue working with Arm? The relationship will take a turn now as Nvidia, unlike SoftBank, also a licensee of Arm and uses its designs in chipmaking.

Nvidia CEO, Jensen Huang, confirmed he wishes to continue with Arm’s neutrality as Nvidia is spending a considerable sum of money and cannot let the clients walk away. He further said that Arm would “continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success.”

Arm’s current CEO, Simon Segars, also stated that for Arm to continue on its successful path, it is crucial that it continues on the same business model. 

Nvidia is ranked to have always been little behind the semiconductor giant Intel in the silicon business, and the later is believed to have the power to set industry standards. Nvidia needed hold of Arm’s technology so that it can have a fair share to control chipset technology as well as important components of data center. Huang said Nvidia would also begin licensing some of its technology to other companies for the first time, using Arm’s services. 

British Reaction to the Deal

Jensen Huang and Simon Segars told that they had Initial talks with British officials who appreciated the company’s efforts for expansions. Jensen has agreed to continue operating Arm’s business from Cambridge and keep investing in Britain.

However, the general reaction in Britain is negative. Since Nvidia is an American company, the deal could mean the British losing their jobs. A general perception is that Arm would now be vulnerable to be used against China in America’s future actions. Technology has played a crucial role in the China-America relationship since the Trump administration has placed restrictions on what tech can be exported to China. 

Nvidia has announced that it will expand Arm’s R&D by building a world-class AI research and education center in Cambridge. It will also house an Arm/Nvidia powered AI supercomputer for groundbreaking research.  

Featured image: Nvidia