The $40 billion purchase of NVIDIA-Arm was supposed to be the tech deal of the century. However, since February 7, 2022, he has died in the water. Anti-competitive concerns and regulatory pressure effectively killed it.
But is it really for the best? Or was this decision at the request of “big tech” like Google, Microsoft and Apple? Let’s dig deeper into the problem.
Who is the arm? What is ARM?
Although this British semiconductor company offers several products and services, it is best known for developing the ARM instruction set. This processor architecture is used in almost all embedded and portable chips, including virtually all smartphone SoCs.
Since they only license their designs, they are the largest chip designer in the world. So while Qualcomm’s Snapdragon, Apple’s Bionic, Samsung’s Exynos, MediaTek’s Helio and Huawei’s Kirin chips compete, their microarchitectures are based on Arm’s design.
More than that, Arm-based chips are also found in smart TVs. They are also gaining market share in the laptop space, especially with the introduction of Apple’s powerful M1 SoC. You’ll also eventually find Arm chips in smart cars, as Qualcomm and other companies collaborate with automakers.
What was NVIDIA’s plan for Arm?
When Arm’s owner SoftBank Group put the company up for sale in 2020, NVIDIA accepted the offer. The company envisioned the acquisition would help them get a head start in AI technology.
According to Jensen Huang, Founder and CEO of NVIDIA:
Simon Segars and his team at Arm have built an extraordinary company that contributes to nearly every technology market in the world.
By uniting NVIDIA’s AI compute capabilities with Arm’s vast processor ecosystem, we can advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to the edge of the IoT, and extending AI computing to every corner of the world.
Would NVIDIA-Arm have become a major manufacturer of processors?
Another potential that the NVIDIA-Arm merger could have brought to light was a new CPU/GPU manufacturer. After all, if AMD has its Radeon GPUs and Intel is launching its Arc GPU, it would make sense for NVIDIA to do the opposite and get into CPU manufacturing.
Given that NVIDIA is a GPU powerhouse, cornering 83% of the discrete GPU market in Q3 2021, they certainly could have achieved this with Arm in their pocket. Apple’s development of the ARM-based M1 chip has proven that this architecture can stand up to x86-64 chips from Intel and AMD.
If the deal had been done and NVIDIA and Arm had released an ARM-based SoC for PCs, we would have had four-way competition for CPUs and GPUs: Intel and AMD for x86-64 systems, and Apple and NVIDIA for ARM chips. . Increased competition in consumer CPU can only be a good thing, pushing companies to spend wisely and grow efficiently.
Dominating the ARM architecture market: a two-edged sword
However, despite this potential, the deal also had significant drawbacks due to the power of the ARM architecture in the world.
Android and iOS account for over 99% of the global smartphone market. Even though different chips power them, from Qualcomm’s Snapdragon and Samsung’s Exynos to Apple’s Bionic and MediaTek’s Helio, all use the ARM architecture.
Additionally, ARM-based chips are now being used for servers and even supercomputers. It is beginning to make inroads into the PC market with Apple, and it is expected to make significant progress in the Internet of Things.
Since NVIDIA competes in those same markets, the successful purchase of Arm would have given them an unfair advantage over their rivals. Since they would have owned the company under license of the ARM architecture, they could raise licensing costs, stifle competitor innovation, or nullify deals altogether, leading to an NVIDIA monopoly on processors based on ARM.
Even though the company promised to adhere to Arm’s current licensing model and maintain customer neutrality, this was a big enough threat to global competition and the stability of the supply chain. supply for governments around the world to cancel the whole thing.
What NVIDIA had to say
When the UK government released its phase one report on the deal, in which it cited a substantial lessening of competition and stifling innovation, resulting in more expensive or lower quality products, NVIDIA responded with this statement:
No industry observer can seriously argue that Intel, AMD and other Arm competitors are so incapable that they can’t even compete with Arm. Intel and AMD are industry leaders, not so-rans. Nvidia chose x86 for its DGX and supercomputers for good reason. Intel and AMD processors aren’t going anywhere and they’ll be competing with Arm for the foreseeable future.
They also added:
Antitrust law preserves competition – it does not give customers and competitors the right to veto acquisitions.
Unfortunately, governments disagree. They saw NVIDIA’s attempted Arm acquisition as the precursor to a monopoly in the crucial ARM-based processor industry.
NVIDIA-ARM deal is canceled – it could have offered real competition
The failure of the NVIDIA-ARM deal is a shame in a way. The prospect of another competitor in the processor market was enticing, but the threat to the global supply of smartphone chips is a much bigger downside. Also, NVIDIA could design an ARM-based CPU by partnering with Arm instead of buying them, if they really want to.
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