Earlier this month, Nvidia offered $40 billion to buy embedded chipmaker Arm from its parent company SoftBank Group in order to expand into high growth markets such as edge internet of things (IoT), smartphones, PCs, self-driving cars, robotics and cloud computing.
While this mega deal on the surface presents several opportunities for Nvidia to move into the embedded processor market, the acquisition could fundamentally change the semiconductor industry moving forward.
Arm architectures, based on reduced instruction set computers (RISCs), are the foundation for most chipsets found in mobile devices and IoT applications. Arm architectures are used in chips and chipsets from the leading communication vendors including Apple, Google, Qualcomm, Samsung, NXP, ST Microelectronics and Huawei.
However, the technology is moving forward into additional markets such as PCs and high-performance computing (HPC) devices and servers. If the deal goes forward, the deal could be quite lucrative for Nvidia, enabling them to compete in many areas it has no footprint in at all, such as mobile devices, PCs and IoT, according to Malik Saddi, vice president of strategic technologies at ABI Research.
“So, if Nvidia succeeds in acquiring Arm, the company could become the most innovative semiconductor company across many industries and markets,” Saddi told Electronics360. “This acquisition, if it materializes, could make the Arm ecosystem much more competitive with a potential to disrupt the entire x86 altogether.”
Acquisition concerns
While the deal may be good for Nvidia, several Arm licensees and Arm ecosystem partners have raised concerns regarding the acquisition, fearing Nvidia may want to disrupt the licensing terms and conditions or even discontinue these licensing deals altogether.
“An interruption of Arm licensing could create a disastrous disruption for many ecosystems that rely on Arm architectures, including the mobile phone market, the MCU, MPU, and connectivity markets that rely extensively on Arm architectures and cores,” Saddi said.
However, this is an unlikely scenario. During the acquisition announcement, Nvidia made it a point that it would continue to operate Arm’s open-licensing model and maintain global neutrality as well as maintain the Arm brand.
But there could be ramifications from this potential acquisition in other ways. Nvidia could enter into a legal race with Arm licensees around the world, particularly China because technology suppliers in the region fear Arm technologies could become property of the U.S., which has been at odds with Chinese products and equipment in numerous markets (see Huawei blacklist impacts far more than just 5G deployment). If the U.S. continues along this course, products with the Arm IP footprint could be banned in China, creating a serious issue for the Chinese supply chain across many industries, Saddi said.
“So, expect the road towards closing the Arm’s deal to be quite long and bumpy and could potentially distract Nvidia’s management from focusing on what they are best at: technology innovation and market transformation,” Saddi said.
While ABI Research believes Arm architectures will remain open-course, appeasing the fears of Arm licensees and regulators, Arm cores will not likely be open-source, potentially creating a new cash cow for Nvidia.
“This will be a highly disruptive approach to the traditional processor chipset business,” Saddi said. “X86 ecosystem will be the most disrupted but other mobile and IoT chipset suppliers will feel the disruption as well.”
International Data Corp. (IDC) said that while Nvidia may be tempted to take advantage of Arm’s IP and technology for its core business, it likely will remain neutral at least in the mobile processor segment due to the large and influential companies that are entrenched in the market. However, Nvidia’s data center business might be a different story.
After Nvidia finished its acquisition of Mellanox, which was another mega deal worth $7 billion, the largest business of Nvidia’s last fiscal quarter was in the data center. IDC said Arm’s emerging server CPU IP business is very synergistic with this business and it could help to revise its server CPU aspirations as well as gain a foothold in cloud service providers.
If the deal does become finalized, it could potentially threaten to weaken Arm, IDC said. If current customers can no longer trust the company or if they second-guess the business model, it could create a rift in customer relationships. IDC said Google and Qualcomm are already looking for alternative architectures, such as RISC-V, so this neutrality in data centers and other core markets may be essential for these relationships to continue.
Additionally, the acquisition could threaten the IP business model as half of Arm’s markets will be exposed to markets where Nvidia competes, creating a conflict of interest, IDC said.
