NVIDIA bought one of the largest processor developers. How it will change the industry

What happened?

American graphics card manufacturer NVIDIA has decided to buy the Arm processor developer. Amount

the deal will amount to $ 40 billion, said the Japanese corporation SoftBank Group, which is the current owner of Arm.

The NVIDIA website also posted a message aboutdeal in which the company's management shared details about the future. Thus, Arm will assume the role of a division of the company, maintain its headquarters in the UK and "continue to use its model of open technology licensing, while remaining neutral towards its customers."

In an interview with Forbes, NVIDIA CEO Jen-Hsun Huangsaid his company will first be integrating its technology "into Arm's vast network." SoftBank Group said that Arm is one of the main assets in the company's portfolio, but the corporation believes that NVIDIA will be able to better unleash the potential of the chip manufacturer.

Microprocessor developer Arm makes chips fornew MacBooks and most smartphones in the world. However, the announcement of the deal sparked dissatisfaction among numerous Arm clients. They are worried that the merger will limit competition and give NVIDIA an unfair advantage, Bloomberg reported.

What does Arm do?

When discussing smartphones, tablets and evensome laptop users encounter ARM processors. This technology contributed to the significant growth in portable technology in the early 2010s, and it still has a significant impact on our devices today.

Arm Building

Arm is one of the largest in the worldfabless developers and licensors of 32-bit and 64-bit RISC processor architectures. They are targeted for use in portable and mobile devices, as well as in servers and supercomputers. For 2020, the ARM processor family is the most popular among other CPUs.

In 2020, the Japanese supercomputer Fugaku onprocessors with ARM architecture took 1st place in performance in the world top-500. ARM architecture processors are mainly used in smartphones, mobile internet devices (MIDs), smartbooks, internet tablets and other mobile and energy efficient devices.

Arm chips are used not only in mobiledevices, but also in wearable electronics, robots, computers, cars, IoT devices, servers, and more recently also in supercomputers. In 2019 alone, more than 22.8 billion devices with processors based on ARM architecture were shipped worldwide, and over the entire period of the company's operation - 180 billion.

Arm does not manufacture its own chips. But the company's chip design (architecture), the instruction set, and the code that the chips use to interact with software are all key parts of the chips used in smartphones, self-driving cars, data center servers, and laptops.

Arm Holdings technologies are highly popular among the largest electronics manufacturers - Qualcomm, Apple, Samsung, Huawei, Microsoft, Amazon, MediaTek, Broadcom and others.

Why did the deal become scandalous?

Because the purchase of Arm by chipmaker NVIDIAthreatens primarily the reputation of the company, Bloomberg said. Many of its customers - Qualcomm, Intel, AMD and others - compete directly with NVIDIA products. The deal raises concerns that Arm technology will make NVIDIA chips more competitive, while other companies may have limited access to Arm licensing.

Apple can also express dissatisfaction. With the help of Arm, the corporation creates A-series processors that run on the iPhone and iPad. Apple usually tries to diversify its suppliers, but avoids working with NVIDIA.

In addition, the market may appeara monopoly company in the field of artificial intelligence and smart data centers, believes Valery Emelyanov, an analyst with the investment company Freedom Finance. Regulators in the UK, China, the European Union and the US may have questions - getting their approval can be very difficult.

The company also claims that Arm will remainneutral supplier and will retain its UK headquarters. In addition, NVIDIA promises to build a new artificial intelligence research center in the country and invest billions of dollars in research and development, and positions the deal as a way to move "to a new stage of AI computing."

The deal has already been criticized by one of the co-foundersArm Hermann Hauser, calling it "disgusting". He explained that NVIDIA is not the right owner for the company because of its business model, which involves the sale of technology licenses to all major processor manufacturers.

"Save the Arm!" Immediately following the announcement of the sale, Arm Holdings co-founder Hermann Hauser launched a public campaign "Save Arm!" (Save Arm!). He is trying to convince the British authorities to intervene in the deal with NVIDIA or cancel it, replacing the company's listing on the stock exchange, Techcrunch reported.

In a letter to British Prime Minister BorisHauser wrote to Johnson that he is extremely concerned about the deal and how it will affect employment in the country, Arm's business model, and the future of UK economic independence from the US and its interests. In particular, he drew attention to the fact that after the move of the Arm headquarters in the United States, many residents of the UK will lose their jobs.

What does the deal mean for the future of the industry?

Now NVIDIA is trying with all its might to removethe tension around the deal. The head of the American company assures the future partner, regulators and investors that the two companies will become the center of the world of chips and create a business for the coming "era of artificial intelligence." NVIDIA will maintain global neutrality for Arm buyers, assures everyone to Jensen, and will also give access to technology from NVIDIA itself.

In addition, NVIDIA promised to leaveArm headquarters in Cambridge and build on it a world-class AI research center, which will create developments in the health, life sciences, robotics, self-driving cars and other fields. Another American company has promised to create its own supercomputer for artificial intelligence based on Arm processors.

A purchase by an American company will not affectin which countries the chips will be supplied, the current head of Arm Simon Segar is also sure. And the partners of the British developer will benefit from the merger, because they will also have access to NVIDIA innovations, Segar says.

But all this carries risks for NVIDIA and the market inoverall, analysts polled by the WSJ warn. Bernstein Research warns that any company that buys Arm will "gain tremendous power over the competition," which will be a "frustrating situation" for the market.

It is not yet clear how the deal could turn out forArm customers - that is, almost all smartphone manufacturers in the world. The main business of the company is licensing, and NVIDIA claims that they are not going to change anything and will continue to sell access to the technology as before, and they spend so much money on the deal that it "makes no sense" to alienate customers.

What's the bottom line?

Despite NVIDIA and Arm have already signedfirst documents, the deal is far from complete. Since the purchase of Arm could affect the technology industry around the world, it will have to be checked by antitrust regulators in several different countries at once - in the UK, USA, China and the European Union.

This can be a problem for NVIDIA, especially withgiven the aggravated relationship between regulators and the tech industry, and between China and the United States. The situation is aggravated by the fact that NVIDIA itself is present in the mobile market, which means, in theory, it can apply anti-competitive practices.

The deal is also likely to collide with intentattention from regulators in different countries - especially given the heightened tensions between the United States and China. Donald Trump has already blocked a deal in the semiconductor market: then the Singapore-based Broadcom tried to buy the American corporation Qualcomm, one of the suppliers of chips for Apple. The reason was that the US authorities feared that the deal would undermine the US dominance in the 5G market. Qualcomm itself was unable to buy the Dutch chipmaker NXP Semiconductors NV due to Chinese interference.

NVIDIA positions the deal as"Complementary" and claims that the companies have minimal overlaps, but regulators may still have questions, for example, about Mali and GeForce GPU technologies. The company can also be opposed by Arm clients who would not like to get a competitor in the person of NVIDIA - this may be another reason to refuse the deal for regulators.

Regulators can freeze the deal for moredeadline, or cancel completely. But under the terms of the agreement, Softbank received two of the 38.5 billion dollars immediately after the signing of the documents. The company will receive another $ 10 billion in cash, and $ 21.5 billion in NVIDIA shares at the close of the deal. This payout structure shows NVIDIA's confidence in the deal: Softbank will receive almost 10% of the company's capital.

In addition, another 5 billion dollars will be paidmoney and shares depending on the results of Arm's work - the terms of this payment were not disclosed. The payout structure also includes $ 1.5 billion in compensation for existing Arm employees - there are more than 6 thousand of them. After the purchase, NVIDIA will gain control over all Arm divisions, except for the Internet of Things.

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