Nvidia buys SoftBank branch for US $ 40 billion in biggest chips deal

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Nvidia Corp. said it has agreed to buy the chip division of SoftBank Group Corp., Arm Ltd. billion in stock and $ 12 billion in cash for the UK-based chip designer, including a $ 2 billion signature payout. Softbank could receive an additional $ 5 billion in cash or stock if Arm’s performance meets certain targets, the companies said in a statement on Sunday. An additional US $ 1.5 billion will be paid to Arm employees in Nvidia shares.The upfront payment to SoftBank is a small premium compared to the $ 31.4 billion the Japanese company paid to acquire Arm in 2016, previously the largest transaction in the semiconductor industry. SoftBank is expected to own less than 10% of Nvidia after the transaction, according to the statement. Regulatory approval can take up to 18 months before the deal goes through and the deal must be approved by the UK, China, the European Union and the United States, the companies said. Nvidia said the UK company “will continue to operate its open licensing model while maintaining the global customer neutrality that has been the basis of its success. Nvidia will add its technology to Arm’s licensed offerings, the Santa Clara, California-based company said.

Jensen Huang, CEO of Nvidia, said he liked Arm’s business model and wanted to expand his large customer base. Regarding concerns that the deal will upend Arm’s relationships with customers, including Apple Inc., Huang said Nvidia was spending a lot of money on the acquisition and had no incentive to do what. whatever would make customers opt out.

Under Huang, Nvidia quickly rose through the ranks of tech companies in terms of market value and influence. Already the dominant force in graphics chips that make video games more realistic, Nvidia has carved out a share of the data center chip market and is transforming into autonomous vehicles.

Arm’s importance far exceeds its revenue, which comes from licensing chip fundamentals and selling processor designs. Its technology is at the heart of the more than a billion smartphones sold each year. Chips that use its code and layouts are in everything from factory equipment to home electronics.

The acquisition is fueled by the desire to bring artificial intelligence to anything that has a switch. Having successfully sold Nvidia’s graphics chips to data center owners to speed up image recognition and language processing, Huang is looking to ensure that his technology helps spread this to everything from autonomous vehicles to smart meters. .

“It’s a company with a reach unlike any company in the history of technology,” Huang said in an interview. “We unite Nvidia’s cutting edge AI computing with Arm’s vast ecosystem.” Arm, based in Cambridge, UK, has carved out a niche for himself by being independent. Fierce rivals such as Samsung Electronics Inc., Apple, Qualcomm Inc., Broadcom Inc., Intel Corp. and Huawei Technologies Co. are all licensees. They either use Arm’s designs as the basis for their own chips or their instruction set, the foundational code used by processors to communicate with software, for proprietary efforts.The acquisition by Nvidia, also the holder of the license, is a challenge to this neutrality. The purchase of SoftBank four years ago has gone largely undisputed, as the Japanese company was not a competitor to any of Arm’s customers.

One customer that will be directly challenged is Intel. Huang said a priority would be to invest in Arm’s efforts to design chips for data center computing. As he carved out a $ 3 billion niche in the business of providing Google and Alphabet Inc.’s Facebook Inc. with graphics processors that help them with their artificial intelligence workloads, Huang said. said he wanted to speed up adoption of the Arm-based powerhouse. processors or CPU. It’s a lucrative market dominated by Intel, which owns around 90% of the shares.

Nvidia has announced that it will retain Arm’s headquarters in the UK and invest in a new facility there to advance artificial intelligence research, educate customers and provide a place for robotics and automation experimentation. Huang said the engagement demonstrates how the acquisition will increase the UK’s technology footprint rather than hurt it.

The sale of Arm by SoftBank unwinds yet another strategic investment in favor of increased liquidity and allows founder Masayoshi Son to focus on the more tactical investment that he has said he wants to pursue. decade. Like Son, he is a charismatic leader with a long-term view of where technology is going. The Taiwan-born entrepreneur is more engineering-focused than his Japanese counterpart and often dives publicly into semiconductor and computing details, and his latest successful revamp of Nvidia’s technology involves dealing with the work of artificial intelligence performed in data centers. Its chips are some of the best for breaking down data manipulation into small chunks and then performing it in parallel at high speed.

Huang will also have a strong footprint in the mobile and smartphone industry. A previous attempt by Nvidia to break Qualcomm’s dominance over this company failed. Qualcomm’s biggest rival in smartphone processors is Apple’s internal effort. These two companies are among Arm’s largest customers. Even without a presence in mobile, Nvidia’s value has skyrocketed over the past decade. The stock, which ended 2010 at US $ 15.42 per share, closed Friday at US $ 486.58. That gives it a market value of just over $ 300 billion, almost $ 100 billion more than Intel, the world’s largest chipmaker with seven times Nvidia’s revenue.



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