NVIDIA reportedly gives up trying to acquire ARM

Back in September of 2020, NVIDIA surprised everyone by announcing that they’ll be buying over the UK-based chip designer ARM Holdings from Japan’s Softbank for USD40 billion. The deal would’ve given NVIDIA some serious leverage over its rivals though, as ARM’s designs are used in everything from mobile phones to laptops as well as tablets, smart TVs and even self driving cars. Needless to say, this led to plenty of attention from both within the industry and from regulators too.

Ultimately, it seems as though all the hurdles and opposition towards the deal has left NVIDIA feeling that the ARM deal is increasingly not worth the trouble. According to a new report by Bloomberg, NVIDIA has informed its partners that it no longer expects to close the deal. Softbank is also preparing to set up an initial public offering for ARM as an alternative to the NVIDIA takeover deal. The USD40 billion deal would’ve been the biggest deal in the semiconductor industry, but since its announcement has attracted plenty of unwanted attention.

The US Federal Trade Commission for instance took the matter to court, suing to block NVIDIA’s deal just last month. They argued that it would’ve given NVIDIA too much control in the industry, giving it control of chip designs used by the world’s biggest companies. It also would’ve disrupted innovation in the industry and undermined NVIDIA’s rivals if the deal went through. Meanwhile in China, regulators there were heavily scrutinising the deal too, with Chinese antitrust lawyers saying it could take until the end of 2022 to settle it. EU antitrust regulators meanwhile had recently set 25 May as its deadline for a decision to be made over the contentious deal.

Within the industry, there was plenty of opposition too. NVIDIA is already the world’s second most valuable chipmaker, with a market capitalisation valued at USD582.1 billion, and taking over ARM risks upending an industry where almost everyone has a deal with the UK chip maker. A group of tech giants that includes Qualcomm, Microsoft, Intel and Amazon have all been in touch with regulators in different countries to provide information that’ll hopefully convince authorities that the NVIDIA takeover of ARM is bad news for the industry.

As for NVIDIA themselves, it seems that several key people in the company have accepted that the deal won’t go through. Softbank though would certainly like the deal to happen, as it means they stand to gain not just cash but also NVIDIA stock, which has almost doubled since the September 2020 announcement. The original value of USD40 billion is pretty much worth tens of billions of dollars more now if taking into account the rise in NVIDIA stock values. There are some Softbank executives though who would rather go with the IPO route for ARM, when the chip industry is still thought of as attractive.

With the FTC lawsuit itself set to take at least another few months to settle, EU regulators waiting till May for a decision and Chinese regulators also taking longer than expected to okay the acquisition, it’s no wonder then that the NVIDIA-ARM deal is looking less and less likely everyday. It’s understood that in the original deal between Softbank and NVIDIA, the deal would expire this September, but will renew automatically if regulatory hurdles take longer than expected. NVIDIA’s original deadline of 18 months no longer looks likely, and a renewal of the original deal will likely happen if NVIDIA wants to continue trying to acquire ARM.

The regulators as well as the industry does have valid concerns of course. ARM is seen as the ‘Switzerland’ of the chip industry, licensing out its chip designs to almost everyone in the scene. With NVIDIA poised to takeover ARM, the concern is that NVIDIA would be unable to keep ARM independent, especially as NVIDIA is an ARM customer too. One thing’s for certain though, which is that NVIDIA’s takeover of ARM is taking longer and messier than perhaps both of them expected.

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