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The world is going mobile first with a vengeance. And the latest announcement from Nvidia that it is acquiring British chipmaker ARM for $40 billion proves the point. Softbank, which bought the company for $31 billion in 2016, is smiling all the way to the bank, while the only ones worried could be AMD and Intel.
Before getting into this, let’s cut to the chase and give you some bits about the deal itself. What we hear is that ARM will operate as a division within Nvidia but remain ensconced at its current HQ, operating its open-licensing model and maintaining customer neutrality. Just so that you get the enormity of the deal, ARM’s IP helps power smartphone processors for a bevy of brands that ranges from Apple, Microsoft and Samsung to Qualcomm.
There had been plenty of talk about how Softbank may take the IPO route with ARM but now it appears as though better sense prevailed. The deal is a cash-and-stock one that could leave Softbank has the largest shareholder in Nvidia.
That Nvidia is the leading GPU maker in the world, some of which also happens to be based on ARM designs, could lead to a few questions being asked by the regulators worldwide. The fact is that the British’s company’s IP controls a large swathe of smartphone processors could mean that Nvidia could further thwart competition from Intel and AMD.
As users of smartphones, we might not care too much about this development, but the fact is that the move could result in a monopolistic competition that could jack up prices in a few years for the smartphones.
Which is why we said earlier that the regulators worldwide might just smell a rat. And there may be several roadblocks before the deal actually gets off the ground. Which was probably why when Apple wanted to move away towards its own processors, it decided to stay away from ARM, given that its licensing model doesn’t match with Tim Cook’s strategy.
Global experts have viewed ARM as more of a licensing business, which could create a strong position for Nvidia to control. However, if there are going go to be challenges ahead from the regulators, Nvidia could dumb down to just license ARM technology to build its own CPU cores or partner with them to do so. We will have to wait and watch how this one pans out.
Meanwhile Nvidia CEO Jensen Huan has already started setting priorities for the new entity. In an interview published on The Verge, he says his first step would be to bring Nvidia technology through ARM’s vast network. Of course, there would be no change in the latter’s licensing, so in all probability he might be suggesting a new range of CPU cores.
If anything, Nvidia appears to position the acquisition as setting up a platform AI computing. Both companies have spoken in the past about strengthening opportunities in AI software that can run on ARM’s chips – be it the tiny ones on phones to the larger ones on servers. Given that Nvidia’s earlier attempts to make CPUs for phones didn’t succeed, this acquisition could be just what the doctor ordered on this front.
“What will change is the rate of our roadmap. We know for sure that data centers and clouds are clamoring for the Arm microprocessor, the Arm CPU. Energy efficiency directly translates to computing capacity, computing throughput, and the cost of provisioning service,” Huang has said in his interview with The Verge.
Which is why we believe that both AMD and Intel have reasons to worry. Of course, that is if the regulators do not first take potshots at the latest acquisition.