Nvidia’s purchase of ARM certainly takes a while, and today the company told the Financial Times that it was unlikely to meet the 18-month regulatory window originally planned. The hit $ 40 billion deal was announced in September 2020 and would give Nvidia control of the world’s most popular architecture, used by Apple, Samsung, Qualcomm, Huawei, Google, Amazon, Microsoft and a ton other companies.
Nvidia CEO Jensen Huang told the Financial Times: “Our discussions with regulators are taking longer than initially thought, so this pushes back the timeline… It is not a particular regulator, but we are confident in the deal, we are confident in the regulators. should recognize the benefits of the acquisition.
Nvidia faces several issues with regulators. First, regulators in ARM’s home country, the UK, have national security concerns. Bloomberg spoke to a “person familiar with the matter” and reports that “the UK is currently inclined to reject the takeover” in its current state. Of course, Nvidia could make some concessions to make the deal work, but Bloomberg quotes an analyst as saying that investors have “low expectations” that the deal will go through.
FT also notes in the United Kingdom that “the agreement has become a politically charged symbol of the loss of influence of companies in the country in the face of foreign takeovers”. Neither that nor “national security” concerns make much sense because the “foreign takeover” has already taken place, however. ARM has been owned by Japanese company Softbank since 2016, and now Softbank sells ARM to Nvidia, an American company.
Does China want another major tech pillar in the United States?
One country that will likely have serious concerns is China, which is still reeling from the US export ban on Huawei, one of China’s largest companies. In the smartphone market, Huawei moved from first place to the “other” category in most market share charts thanks to the ban. Huawei is also the world’s largest manufacturer of telecommunications equipment and is finally starting to lose money in this market as well. Nvidia’s purchase of ARM would represent even greater US control over the wider smartphone and tech market.
Part of the delay with Chinese regulators is apparently Nvidia’s fault: The company did not submit a request to Chinese regulators until June 2021, eight months after the deal was announced. The company must now wait up to 18 months from this investigation end date, which would postpone matters to December 2022. Nvidia ended up waiting until the last minute – the deal with Softbank will be void if Nvidia cannot close by the end of 2022.
Nvidia would not be the first company to shut down a massive tech deal by Chinese regulators. In 2016, Qualcomm attempted to buy NXP for $ 47 billion, but the company did not get Chinese regulatory approval in time and ended up abandoning the deal in 2018.
ARM licenses the ARM chip architecture and pre-fabricated processor designs to many large technology companies, and these licenses underpin the core products of many companies. Under Softbank, ARM was considered a neutral party because Softbank does not compete with ARM licensees and Japan is not currently engaged in a trade war with China. Nvidia has a reputation for being difficult to work with, and it’s unclear how well “Nvidia ARM” would work with others. It’s also unclear how the company would inevitably try to connect ARM licenses to its GPU business (ARM is also designing mobile GPUs to pair with its CPUs).
Nvidia insists it will keep ARM “neutral,” and the company has an entire website dedicated to presenting the merger to the world. Specific pages detail Nvidia’s “vision” for ARM in the UK, Europe and China. So there is a page for each regulator that has raised concerns about the deal. If Nvidia does not Keeping all of its promises, the industry sees the open source RISC-V architecture as a possible loophole, although it would require a massive, coordinated, industry-wide effort to replace ARM. If the deal with Nvidia fails, Softbank could choose to list ARM on the stock exchange rather than sell it outright. For now, time is running out.