Advanced Computing in the Age of AI | Thursday, September 23, 2021

Nvidia’s Proposed $40B Acquisition of Arm Faces Possible Opposition from UK Official: Report 

The proposed $40 billion acquisition of chip IP vendor Arm by GPU powerhouse Nvidia continues to be under review by regulators in the United States, China, the European Union and in the U.K., but lingering national security concerns from at least one U.K. official could potentially block the deal, according to a report

The proposed acquisition, which was unveiled by Nvidia last September, continues to face concerns from Oliver Dowden, the U.K.’s secretary of state for digital, culture, media and sport and a member of the British Parliament, according to an Aug. 3 report by Bloomberg.

The Bloomberg story said that the U.K. is considering the prospect of blocking the Nvidia takeover of British-based Arm “due to potential risks to national security, according to people familiar with the discussions.”

This is not the first time that Dowden has voiced concerns about the deal. In April, Dowden issued an intervention notice that asked the U.K. Competition and Markets Authority (CMA) to assess the competition, jurisdiction and national security impact of the deal, according to an earlier story by Reuters.

Dowden received the CMA's phase one report on July 20. There is no deadline for his next action on the matter as the U.K. continues its investigation into the proposed merger, but a decision is expected to be announced as soon as possible, according to the U.K. government.

“The assessment … contains worrying implications for national security and the U.K. is currently inclined to reject the takeover, a person familiar with government discussions said,” according to the Bloomberg story. “The U.K. is likely to conduct a deeper review into the merger due to national security issues, a separate person said.”

At the same time, though, despite Dowden’s concerns, “the U.K. could still approve the deal alongside certain conditions, the people added,” according to the story.

A spokesman for Dowden’s office declined a request from EnterpriseAI for comment on the Bloomberg story or on the status of the situation.

Dowden will decide whether to approve the deal with or without conditiions, or he could refer it for a longer, in-depth investigation, the story continued.

Jack Gold, analyst

Jack E. Gold, president and principal analyst of J. Gold Associates, LLC, told EnterpriseAI that there continue to be many lingering questions about whether this deal can go through the regulatory hurdles it is facing in multiple nations.

“I am skeptical that the acquisition will go through,” said Gold. “It is not just the U.K. that needs to approve, it is also China that has its own set of issues with the deal and the ability to more fully compete on the world stage with its new silicon initiatives. And the EU in general may not be too enthusiastic for this acquisition to take place.”

From Nvidia’s perspective, it wants to acquire Arm so that the parent company can be a full service provider of processors, said Gold. “It sees marrying the Arm tech with its own graphics and AI tech to create a compelling alternative to Intel especially, but also other mainstream provides like AMD, Qualcomm, etc. I am not convinced that Nvidia needs to actually acquire Arm to achieve this.”

Most Arm licensees are “very wary” of Nvidia buying the company, said Gold.

“They feel Nvidia could well influence the direction of Arm to its [own] benefit and not to the benefit of the wider Arm licensee community,” he said. “That is a major concern on any acquisition, but especially this one as there are so many Arm licensees that are wholly dependent on Arm maintaining a leadership position and licensing fairly to all comers. Anything Nvidia might do to alter this scenario is very disconcerting.”

Those concerns from Arm licensees “has to weigh on the regulators as they ponder whether to approve this or not and how it will affect the broader community,” said Gold. “There is a whole food chain built around Arm tech, so it is not just the Arm company itself that needs to be considered. It is the effect all the way down the chain.”

Gold said he believes that any security concerns being voiced by U.K. officials are likely related to companies that license Arm technology for military and defense purposes.

“What are the implications to national security if Arm is no longer an independent company and is instead influenced and controlled by another company that may not have the best interest of Arm licensees at heart?” he asked. “I think that is part of the concern as well – what does it do to the specialized chip makers that support government initiatives. Bottom line – I give this a less than 50 percent chance of being a done deal based on all of the issues and regulators involved.”

Charles King, analyst

Another analyst, Charles King, principal analyst with Pund-IT, said that it is “impossible to tell the severity of the U.K. security concerns” solely from the Bloomberg story. “They could range from points that could be addressed by further negotiations to issues that would be difficult to overcome. I expect Nvidia will do everything in its power to complete the deal.”

King said that until Dowden’s report is made public that any comments would be purely speculative.

“Overall, I believe Nvidia is pursuing Arm with the best intentions,” he said. “However, the deal's complexities demonstrate how natural difficulties can arise when an acquisition carries what appear or can be interpreted as potential conflicts. If Nvidia follows through on its promises, there should be few if any competitive problems.”

Alex Norton, the principal technology analyst and data analysis manager for HPC and emerging technologies with Hyperion Research, agreed that it is too early to gauge what will come of the deal.

Alex Norton, analyst

“Regulators in the UK, and China as well, are presumably weighing a complex set of pros and cons about the potential acquisition that have major implications for everything from their economies to their national security,” said Norton. “It’s premature for anyone to predict the outcome of those deliberations except to say the outcome is likely have an important impact on the HPC community.”

Interestingly, in late June several competing chip companies voiced some positive words publicly about the proposed Nvidia acquisition of Arm.

Broadcom, Marvell and MediaTek all made statements saying that they see the move as one that could ultimately benefit their own businesses.

Since Nvidia proposed to acquire chip IP vendor Arm last September, 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.

Arm was purchased by Softbank 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.

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.

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