Japanese technology conglomerate SoftBank will sell all shares in its semiconductor subsidiary Arm Limited to NVIDIA in a USD 40 billion agreement.
The sale, which is the largest transaction in the semiconductor industry ever, will allow NVIDIA, the biggest graphic processing unit company in the world, to extend its market share in the semiconductor industry with Arm, the UK’s largest tech company.
NVIDIA will have sole access to Arm’s products, which are used in iPads, iPhones and Apple Watches, as well as various other Nintendo and Sony devices. SoftBank will also net a USD 8 billion profit four years after it first acquired the subsidiary.
An outline of the acquisition has already been agreed upon, and the deal, which SoftBank estimates will take 18 months to close, will see an immediate USD 2 billion cash payout followed by another USD 10 billion in cash and USD 21.5 billion of stocks in NVIDIA upon closing the deal. An additional USD 5 billion is payable to SoftBank, subject to Arm meeting financial performance-based targets, and USD 1.5 billion in NVIDIA stock awards will be distributed amongst current Arm employees.
Following news of the transaction, NVIDIA’s stocks opened at USD 523.05 on Monday, up 7.5% from last Friday’s close, while SoftBank stocks opened at USD 60.55 on Monday, seeing a 9.2% increase relative to before the weekend.
However, the acquisition is not devoid of controversy. There are concerns that US-based firm NVIDIA could radically change Arm’s current business model, which currently licences intellectual property to third-party manufacturers. Instead, NVIDIA could increase its own competitive power by restricting market access to Arm’s semiconductor processors and chips.
Hermann Hauser, one of Arm’s investors and co-founders, affirmed in The Guardian that “It is very much in NVIDIA’s interest to kill Arm.” In an open letter to Boris Johnson, Hauser further stated that “the sale of Arm to Nvidia will destroy the very basis of Arm’s business model which is to be the Switzerland of the semiconductor industry dealing in an even-handed way with its over 500 licensees.”
The acquisition could also play into the entangled politics of the US-China trade war, which has seen Chinese telecom and mobile manufacturers Huawei and ZTE denounced as a threat to national security by the US government and viral social media platform TikTok restructured.
NVIDIA’s press release appears to have responded to some of these concerns, stating that “Arm will continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success, with 180 billion chips shipped to-date by its licensees.”
The company has also announced plans to build a state-of-the-art AI supercomputer powered by Arm CPUs in order to “attract researchers and scientists from the U.K. and around the world to conduct groundbreaking work”, according to NVIDIA CEO Jensen Huang.