SoftBank Closes $40 Billion Deal to Sell ARM to Nvidia

SoftBank Closes $40 Billion Deal to Sell ARM to Nvidia

SoftBank Group Corp is getting close to a deal which will see it sell Arm Holdings to Nvidia Corp. for over $40 billion. The Japanese conglomerate has been in talks with Nvidia for weeks now as it seeks to sell off some of its subsidiaries to offset its financial troubles.

The Wall Street Journal reported that the cash-and-stock deal is expected to close on more than $40 billion. The deal will mean a big win for SoftBank who bought ARM for $32 billion four years ago, and has been struggling with the British company.

SoftBank and Nvidia started talking in July, as Nvidia is seeking to consolidate its play in the semiconductor industry. ARM is an English tech company with a great reputation in chip making. It makes chips for modern devices including smartphones, an area where Nvidia is yet to find foothold.

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But there was a challenge; Bloomberg reported that ARM’s customers, including Apple, Samsung, Qualcomm, Advanced Micro Devices and Intel could demand assurances that a new owner would continue providing equal access to ARM’s instruction set. It was the concern that led to SoftBank buying ARM the last time it went up for sale, because it is a neutral company. This concern appears to have delayed the deal for weeks, but sources familiar with the negotiation told WSJ a deal will be announced in coming days.

COVID-19 pandemic has opened more opportunities for players in the chip industry through disruption of businesses, creating needs for alternate ways of doing things as the world comes to terms with the new normal.

Market Watch noted that the semiconductor industry is seeing a surge in consolidation as chipmakers seek scale and expand their product portfolios to support the increasing number of everyday items that are connected to the internet. This means there are rooms to expand in IoT.

Analysts believe that purchasing ARM would help Nvidia to accelerate innovative ideas.

“With Nvidia’s low-cost fabless model enabling it to focus on R&D, engineering and programming, the fit with Arm would be perfect,” said Neil Campling, an analyst at Miraband Securities.

Nvidia has turned a big name in chip making, becoming the world’s largest graphics chipmaker. The California-based company has witnessed more than twenty-fold surge in stock, according to Bloomberg, giving it the opportunity to take on bigger deals. Nvidia’s market value has increased over time to more than $260 billion, making it more valuable than Intel.

Much of its success is attributed to architectural diversity into smart cars, data centers and networking gear. New Street Research LLP said the company will significantly rise if it pursues an initial public offering next year, and estimates its valuation to rise more than $68 billion by 2025.

ARM has been enjoying patronage from big tech companies as its designs become top choice for Android and iOS systems. Recently, Apple announced it is dropping Intel as it intends to switch its Mac computers over to ARM-based chipsets.

So if the deal is successful, it will become one of the biggest deals of the year. Another of the year’s biggest deals was the $22 billion purchase of Maxim Integrated Products Inc. by fellow chipmaker; Analog Devices Inc. Analysts said ARM could go public as early as next year, but the deal will likely attract scrutiny from antitrust regulators and potential pushback from ARM’s customers.

NVIDIA founder and CEO Jensen Huang sent the following letter to NVIDIA employees today:

Hi everyone,

Today, we announced that we have signed a definitive agreement to purchase Arm.

Thirty years ago, a visionary team of computer scientists in Cambridge, U.K., invented a new CPU architecture optimized for energy-efficiency and a licensing business model that enables broad adoption. Engineers designed Arm CPUs into everything from smartphones and PCs to cloud data centers and supercomputers. An astounding 180 billion computers have been built with Arm — 22 billion last year alone. Arm has become the most popular CPU in the world.  

Simon Segars, its CEO, and the people of Arm have built a great company that has shaped the computer industry and nearly every technology market in the world.

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. Amazingly, AI software can perceive its environment, infer the best plan, and act intelligently. This new form of software will expand computing to every corner of the globe. Someday, trillions of computers running AI will create a new internet — the internet-of-things — thousands of times bigger than today’s internet-of-people.  

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.

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.

Our R&D scale will turbocharge Arm’s roadmap pace and accelerates data center, edge AI, and IoT opportunities.

Arm’s business model is brilliant. We 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.

Arm’s headquarter will remain in Cambridge and continue to be a cornerstone of the U.K. technology ecosystem.NVIDIA will retain the name and strong brand identity of Arm. Simon and his management team are excited to be joining NVIDIA.

Arm gives us the critical mass to invest in the U.K. We will build a world-class AI research center in Cambridge — the university town of Isaac Newton and Alan Turing, for whom NVIDIA’s Turing GPUs and Isaac robotics platform were named. This NVIDIA research center will be the home of a state-of-the-art AI supercomputer powered by Arm CPUs. The computing infrastructure will be a major attraction for scientists from around the world doing groundbreaking research in healthcare, life sciences, robotics, self-driving cars, and other fields. This center will serve as our European hub to collaborate with universities, industrial partners, and startups. It will also be the NVIDIA Deep Learning Institute for Europe, where we teach the methods of applying this marvelous AI technology. 

The foundation built by Arm and NVIDIA employees has provided this fantastic opportunity to create the leading computing company for the age of AI. The possibilities of our combined companies are beyond exciting.  

I can’t wait.


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