Nvidia Buys Arm For $40 Billion From SoftBank: All You Need To Know

Gaming giant Nvidia is all set to buy British chip designing company Advanced RISC Machines (Arm) from Japan's SoftBank Group in a $40 billion deal, the companies revealed on Monday.

Nvidia said that it would pay SoftBank $21.5 billion in Nvidia common stock, along with $12 billion in cash, which includes $2 billion payable at signing.

Nvidia also said that SoftBank could be paid an additional $5 billion (in cash or shares) depending on Arm's business performance, while pledging $1.5 billion in Nvidia shares to Arm employees.

This marks an early exit for SoftBank, who had acquired Arm for $32 billion just four years ago, but had failed to make considerable profits.

Furthermore, the deal has raised eyebrows in the chip-making industry, with Arms being one of the biggest chip design supplier to most mobile phone chip making companies, which include Nvidia's rivals Samsung and Qualcomm. In fact, Nvidia has been in race against both these companies to acquire Arms for a better part of the year.

Nvidia, on the other hand, has been one of the biggest manufactures of graphics processing units for computers, laptops and gaming consoles, but has been kept away from the mobile phone market thus far. Acquiring Arms would turn it into one of the biggest players in the industry for both smartphones and computer, by monopolising the supply of chip design.

Competitors On Edge

This deal is bound to create unease among Arms clientele, with many being direct competitors to Nvidia.

Geoff Blaber, Vice-President of research for the Americas with CCS Insight, said, "This (deal) will rightly face huge opposition, most notably from Arm licensees who have collectively shipped an average of 22 billion chips annually over the last three years."

On the question raised on how this deal will affect Arms open approach to licensing chips to other chipmakers, Nvidia founder and CEO Huang said in a letter to Nvidia employees that under the new deal, Arms will "maintain its open-licensing model and customer neutrality, serving customers in any industry, across the world, and further expand Arm's IP licensing portfolio with NVIDIA's world-leading GPU and AI technology."

The deal is expected to close in 18 months after being subjected to regulatory approval in the United States, the United Kingdom and China, and is likely to be under close scrutiny in China, who is currently going through a phase of geopolitical friction with the United States, where Nvidia is headquartered.

The Donald Trump-administration has taken stringent steps on the technological exports to China, with China taking similar actions in return. Commenting on this subject, Nvidia told Reuters that Arms will retain its headquarters in Cambridge, English, and will not be subjected to US exports control under this deal.

A Push For AI

According to Huang, this would be a turning point to an artificial intelligence-driven approach to software designing.

"We are joining arms with Arm to create the leading computing company for the age of AI. AI is the most powerful technology force of our time. Learning from data, AI supercomputers can write software no human can," Huang said in a letter to Nvidia employees on Monday. "NVIDIA will bring our world-leading AI technology to Arm's ecosystem while expanding NVIDIA's developer reach from 2 million to more than 15 million software programmers."

Nvidia also pledged to expand Arm's R&D in Cambridge by creating a "world class AI research centre". According to the company, this research centre will include an Arm/Nvidia-based supercomputer, research fellowships and partnerships, AI training, a startup accelerator and an open hub for industry collaboration.

"Uniting NVIDIA's AI computing with the vast reach of Arm's CPU, we will engage the giant AI opportunity ahead and advance computing from the cloud, smartphones, PCs, self-driving cars, robotics, 5G, and IoT," Huang added.