Advanced Computing in the Age of AI | Sunday, September 19, 2021

Nvidia Arm Merger Proposal Gets Support from 3 Rival Chip Companies 

Since Nvidia proposed to acquire chip IP vendor Arm last September for $40 billion, several major tech companies, including Google, Microsoft and rival chipmaker Qualcomm, continue to vocally oppose the deal, issuing repeated concerns about its negative effects on competition and pricing.

But now for the first time, Nvidia and Arm are hearing some positive words about the proposed acquisition from three other chip companies – Broadcom, Marvell and MediaTek – which are publicly saying that they see the move as one that could ultimately benefit their own businesses.

The fresh support for the Nvidia Arm merger was revealed in a June 27 story by The (London) Times, which reported that the three companies “have broken ranks to give their blessing” to the proposed deal, which is being carefully reviewed by governmental antitrust regulatory agencies in the UK, the United States, the European Union and in China. In the UK, the deal is being criticized by at least one official on national security and competition grounds, according to The Times.

“The move by the chip firms comes at a crucial time for Nvidia as the UK’s competition watchdog prepares to deliver its judgment — a review that has cast doubt on the takeover going through,” the paper reported.

In a related story by CNBC, Hock Tan, Broadcom’s president and CEO, said that his company backs the Nvidia Arm deal. “Arm is a key partner to Broadcom, and access to its technology is important to our current and future success,” he told CNBC in a statement. “Broadcom supports Nvidia’s proposed acquisition of Arm because Nvidia has assured the industry that it will increase the overall investment in Arm’s technology and that it will continue to make that technology available to the industry on a fair, reasonable and non-discriminatory basis.”

Marvell’s CEO, Matt Murphy, also told CNBC that his company has received proper commitments by Nvidia that address Marvell’s concerns about how potential changes to the Arm ecosystem could have negatively affected his company. With those concerns resolved, Murphy told CNBC that he envisions benefits to the deal, including “an acceleration of roadmaps for high-end CPU cores and the enablement of broader adoption of Arm-based designs in the industry.”

At MediaTek, the Taiwanese mobile chip developer, CEO Rick Tsai, has also voiced his support for the deal. “The semiconductor industry will benefit from the combination of NVIDIA and Arm,” Tsai said in a statement posted on an Nvidia web page outlining the proposed acquisition. “The combined open platform will enhance and accelerate delivery of critical computing technologies, including CPU, GPU and AI. We believe that the merger will enable MediaTek and other industry participants to bring more competitive and comprehensive products to the marketplace.”

Support From Rivals is Helpful: Analysts

Several industry analysts told EnterpriseAI that the recent positive words about the pending deal could be a positive sign for Nvidia and Arm after months of loud criticisms from other tech companies.

Addison Snell. analyst

“Supportive public statements from important chipmakers such as Marvell, Broadcom and MediaTek could be influential in allowing this deal to go forward,” said Addison Snell, the CEO of Intersect360 Research. “These give credence to the idea that Nvidia’s competitive target is not other ARM vendors, but rather the x86 paradigm. In that light, it is easy to argue that Nvidia’s acquisition of Arm would increase competition in server markets—where Intel has been the dominant provider for 15 years—rather than decreasing it.”

Patrick Moorhead, analyst

Patrick Moorhead, principal analyst with Moor Insights & Strategy, agreed. “I believe these partners coming out in defense of the deal helps,” he said. “So far, we have only seen chipmakers that have issue with it, like Qualcomm, so this looks like a new chapter in the tussle of control over Arm.”

Another analyst, Karl Freund, principal of Cambrian AI Research, said it is not a surprise that some companies eventually came to Nvidia’s side in the matter. “Apparently, not everyone thinks alike,” he said. “If a company believes Nvidia would provide good stewardship and even leadership for Arm, that is a better outcome than leaving it dangling under SoftBank.”

Karl Freund, analyst

Freund said he thinks that the newly-vocalized support “could improve the chances that Arm will fall into Nvidia’s arms. While some competitors … [including] Qualcomm have objected, the industry would certainly benefit from adding Nvidia’s GPU and AI IP to the Arm arsenal.”

Softbank bought Arm only five years ago in July of 2016 in a $32.25 billion all-cash deal, but the Japanese technology investment company has hemorrhaged cash since the first quarter of 2020 and has been looking to sell off assets to raise money. SoftBank’s financial problems arose as earlier bets on the rise of connected devices have failed to pay off. The company’s Vision Fund, its AI investment fund, reportedly suffered a $13 billion annual loss in its fiscal year ending in March 2020.

Acquiring Arm would solidify Nvidia’s standing as a major player in wireless and other markets as it makes steady inroads in enterprise data centers. The graphics leader has released a stream of ever-more powerful GPUs targeting machine learning and other AI workloads that now dominate corporate data centers.

Nvidia CEO Shares More Insights on the Deal

In their first joint interview since announcing the Nvidia Arm acquisition last year, Nvidia CEO Jensen Huang and Arm CEO Simon Segars again spoke about the pending merger at the recent Six Five Summit, which was held by analyst companies Futurum Research and Moor Insights & Strategy.

Huang reiterated that Nvidia and Arm have been working together for a long time and that by joining forces, it will allow increased growth and synergies for both businesses.

“We do not have to buy Arm – we want to buy Arm,” said Huang. “I want to buy Arm. This combination … is going to expand the reach of Nvidia's ecosystem. Although these markets are rather new to us – mobile and embedded and others – these markets are going to benefit from AI.”

By bringing the two companies together, Nvidia will complement Arm’s CPU core designs and IP to advance its products into competing worlds and competing markets where Nvidia is already strong and where it would be hard for Arm to reach independently, he said.

The Nvidia Arm acquisition proposal has taken on more interest this year due to the global chip shortage and increased compute demands for AI, machine learning and other technologies in response to the COVID-19 pandemic, according to a recent Datanami story. Chip production slowdowns and component shortages caused by pandemic-related shutdowns around the world have contributed to the problems, putting pressure on a wide variety of chip-starved industries.

Earlier in June, Qualcomm’s incoming CEO inspired headlines by suggesting that instead of being acquired by Nvidia, that Arm would be better off if it sought investments from a consortium of companies that would “float” the company.

Instead of proceeding with the potential Nvidia acquisition, Cristiano Amon, who is scheduled to take over as Qualcomm’s CEO on June 30, says that a better plan for Arm would be for Arm owner SoftBank to “float” the company and seek investments from a consortium of companies, including Qualcomm, that are interested in its success, the report continued.

Amon’s investment idea could only likely happen if the Nvidia acquisition plans are eventually nixed by regulators, or if Arm would somehow open its ears to such an alternative plan.

In a related report, investment website Seeking Alpha reported on June 28 that due to the support announced for the Nvidia Arm deal by Broadcom, Marvell and MediaTek that Citi has upgraded its probability of the deal going through to a 30 percent chance, up from a 10 percent chance earlier.

“Citi said the news is a ‘big step forward’ and the firm expects that the UK will likely approve SoftBank's sale of Arm because Nvidia has publicly said it will invest more into Arm UK,” according to a statement from Citi analyst Atif Malik. “Citi writes that if Nvidia can find a method of keeping the Arm China unit as a separate entity ‘without access to any GPU/AI IP’ there may be a way to get both U.S. and China regulatory approval.”

 

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