Arm & NVIDIA – The unthinkable pt. VII.

NVIDIA wins major support.

• NVIDIA got a big boost for its acquisition of Arm with MediaTek, Broadcom & Marvell all publicly supporting the deal which I think greatly reduces the biggest roadblock to the transaction.
• The biggest problem for anyone contemplating the acquisition of Arm has always been the issue of Arm’s independence.
• Billions of chips using Arm’s IP in the processing unit ship every single year and from companies who aggressively compete with one another.
• Consequently, Arm could never be seen to be partisan to one company or another as this would incentivise the disadvantaged players to seek alternative options such as RISC-V.
• This would threaten the integrity of the giant ecosystem that has been built based on the Arm processor and also make life more confusing for developers who would have to deal with more incompatible processor designs.
• NVIDIA is a major competitor for Qualcomm, Broadcom, Marvell, Intel, MediaTek, Samsung and so on which is why this issue has arisen now and did not when SoftBank bought the company.
• I had always assumed that before announcing the deal NVIDIA, Arm, and SoftBank had had a quiet word with the key Arm customers to ensure them of Arm’s ongoing independence and convince them where they had doubts.
• Surprisingly, this did not happen and many of Arm’s customers were surprised and, in some cases, dismayed to learn that one of their fiercest competitors would end up controlling the technology upon which they are dependent.
• I do not think that there is a real issue with maintaining Arm’s independence as there are examples in the industry where this has been successfully achieved with no issues at all.
• Samsung has successfully managed an almost identical problem within its business units for years with no real issue.
• Samsung’s handset competitors have been purchasing memory, storage, and displays from Samsung for years and would have stopped doing so in a heartbeat had there been even a whiff of unfair treatment.
• Hence, I think that this issue is entirely manageable, but the problem is that this concern is not going to go away until 5 or so years after the acquisition has closed and the deal has been a smashing success and the benefits have been proven to the critics.
• However, public support for the transaction from Broadcom, MediaTek, and Marvel goes a long way to reducing this concern leaving Qualcomm, Intel, and Microsoft as the main critics of the deal.
• Apple has not voiced an opinion one way or the other but as the holder of an architecture license, it is not particularly affected by the ownership of Arm as this license type means that it makes its own chips.
• This combined with vocal support from three large Arm customers provides major support for this transaction as without wide consensus, the resistance is likely to crumble.
• Hence, I think that this leaves regulators as the largest hurdle yet to get over and with the China application ongoing, this too appears to be on track.
• On balance, I still think that the best place for Arm is as an independent public company as this is the only way to put the concerns permanently to rest.
• However, there is a case to be made for this acquisition and the hurdles for it to succeed have been significantly reduced with vocal support from a range of Arm customers.