SoftBank’s plan to sell Arm to Nvidia is hitting antitrust wall around the world

https://asia.nikkei.com/Business/Technology/SoftBank-s-plan-to-sell-Arm-to-NVIDIA-is-hitting-antitrust-wall-around-the-world

by lawrenceyan • 5 years ago

355 187 5 years ago

asia.nikkei.com

thekyle• 5 years ago

I wonder why they don't just do a direct listing and sell it to retail investors.

throwaway4good4• 5 years ago

That is a good question; I assume the answer is that they cannot get a 40B valuation if they IPO.

martinald• 5 years ago

I mean it was valued pretty close to that on the public markets before SoftBank bought it, and tech shares in general have appreciated massively since then, so I think they could get a decent price at IPO.

Wronnay• 5 years ago

I think they would easily get a 40B valuation on an IPO.

People know that ARM is used in all smartphones and after Apples M1 and the growing usage in Servers many believe that ARM is the future.

Also - with an IPO, customers of ARM like Apple could easily buy shares of ARM...

Probably the reason why Apple didn't bought ARM is because they know they wouldn't get through the competition authorities.

But with an IPO, Apple and other customers could buy something like 9 percent of ARM...

runawaybottle• 5 years ago

You must have not seen the trajectory equities are on now days. 40b would be an absolute joke to achieve by end of year.

andy_ppp2• 5 years ago

Because it’s worth more to nvidia would be my guess?

Ericson23142• 5 years ago

A good indication of an anti-trust violation, if there ever was one!

goatinaboat• 5 years ago

The UK government should buy back ARM, it’s a strategic national asset, as is IMG.

WJW• 5 years ago

It's not really "buy back" if you never owned the company in the first place though. In any case that is not really the way western governments handle strategic companies. The US government is not acquiring Intel or Lockheed any time soon, they just limit where it can export their products to.

jayflux• 5 years ago

The US government is not acquiring Intel or Lockheed any time soon

Well that's because the US government aren't worried about Intel being acquired by anyone else outside of the US anytime soon. Secondly, there's enough competition in the valley that even losing Intel wouldn't be a disaster for the US. The 2 situations aren't really the same.

guerrilla• 5 years ago

In any case that is not really the way western governments handle strategic companies.

Except for in Scandinavia where that is how they do (more so in the past than now.)

LatteLazy2• 5 years ago

The UK govt is made up of the people too stupid to refuse the job after the brexit vote. Their strategy is to hold on really tight, do nothing and hope their problems go away while awarding their friends massive no bid government contracts to do nothing.

Im not just bring pejorative, come and take a look. The first thing PM did after the vote was resign. Theresa May took over and couldn't make it work. Now we have BoJo the Clown and he won because the oppositions best candidate was all but a communist who wanted to shut down most of the banks and all go back working in factories. BoJo's never had any strategy beyond opportunistism. That won't really work in this circumstance. Except that the sale could probably be approved if ARM spent £100m on "consulting" from a tory donor?

ClumsyPilot• 5 years ago

'a communist who wanted to shut down most of the banks and all go back working in factories'

That sounds like its straight from the Daily Mail, quite unfair summary.

In terms of economic damage, BoJo is certainly giving him a run for his money

Back to the topic at hand: British state appear very reluctant to interfere with 'free market', significantly more so that the US government. I don't feel donation would be neccessary

Rochus2• 5 years ago

That would then be nationalization and thus the opposite of the course that Thatcher had initiated. We are currently seeing such tendencies with the British Railways, but this is likely to remain the exception.

tonyedgecombe• 5 years ago

They seem to be changing their position on this:

https://www.theguardian.com/business/2020/jul/03/uk-buys-sta...

Lio• 5 years ago

I don’t see this as likely.

The current Conservative government have large factions that are ideologically opposed to state interference in the free market.

Historically they’ve preferred to promote a free market for foreign companies even at the expense of local firms.

For example, this has happened in 80s and 90s when the UK had a lead in optical telecommunications and the Conservative government locked BT out of the cable TV market in favour of foreign competitors NTL and Telewest.

At the time these cable companies were using old style coax and wouldn’t have been able to compete against BT using state of the art optic fibre that only BT had.

mirekrusin2• 5 years ago

With savings from brexit I'm guessing?

throwaway4good4• 5 years ago

Why would the Chinese authorities accept this deal if it means ARM will be on American hands and thus subject to arbitrary export controls (as examplified with Huawei, now possibly Xiaomi)?

vermilingua• 5 years ago

Because SoftBank is Japanese and they’d have no choice?

ginko3• 5 years ago

You're severely underestimating the Chinese government's ability to sanction nvidia and softbank if they went forward without their approval.

1996• 5 years ago

The US can raise antitrust objections to EU companies acquired by other EU companies.

Legally, nobody need to obey the objections, but if the merge still happens, the new company might discover doing business in the US has suddenly become much harder :-)

throwaway4good4• 5 years ago

If you read the article it appears that the Chinese authorities have considerable powers.

InTheArena• 5 years ago

China and Allen Wu are trying to steal ARM China from under SoftBank in the first place. SoftBank is totally screwed no matter what happens. Allen Wu has decided that he can ignore ARM INC, and China will happily go along with anything he wants as long as it means that ARM China is a Chinese directed institution.

verall• 5 years ago

And the Chinese regulators will be happy about a deal where nvidia buys arm but either spins off arm china or just agree to give arm china the freedom to do whatever without oversight from HQ.

gigatexal4• 5 years ago

Good I hope the whole sale fails

askjdlkasdjsd• 5 years ago

Imagine working hard your whole life that you get to a point that most cannot even dream of getting to and having some schmuck on an online forum who knows nothing other than some headline hoping that you would fail.

It appears the trend is becoming that just by being negative and short on everything is some kind of lazy hack to appear intelligent.

intrasight• 5 years ago

He's just expressing his opinion and it one likely shared by many other people.

tsomctl2• 5 years ago

Are you annoyed that he's being negative, or because he didn't back it up with a reason?

Because I've done development both for embedded arm microcontrollers and CUDA. ARM feels like a benevolent overlord that wants to help you. Documentation is open, compilers are easily accessible, there's lots of random blogs with best practices on how to do common operations. Nvidia feels like their entire goal is to extract as much money out of you as they can.

I'm not hoping ARM fails. I'm hoping the sale fails, because if the sale succeeds, ARM will fail.

AlexandrB• 5 years ago

Imagine building a business on the goodwill and trust of your customers and then selling it off to the highest bidder while leaving them hanging in the wind. That's the typical acquisition story.

staticman2• 5 years ago

Who is the hard worker in this statement? A corporation is literally a set of legal documents. No human was discussed at all.

gigatexal4• 5 years ago

Lol. Do you work for SoftBank? Or Nvidia? They could have gone public and all employees with any skin in the game (aka options) would make a killing. Nvidia ownership of ARM would only harm the industry.

aurizon3• 5 years ago

Recall how Intel was dictatorial in levering the 286 architecture into all the LSI chips that board makers needed. How Intel extorted the market price wise until regulators forced a way for AMD to compete and how the decline and fall of Intel thus came to pass? Now think what could happen of Nvidia owned ARM, Apple would soon feel the screws. as would all the ARM using group as Nvidia would flay them to the bone to get that $40 billion it went into debt to get back so it can throw the money lenders off their back. Rates will rise, and the screws Nvidia would feel would go through them and into all their clients. Since it is a software-like business, it would not be easy for others to repeat what they did to compete.

lotsofpulp2• 5 years ago

Now think what could happen of Nvidia owned ARM, Apple would soon feel the screws. as would all the ARM using group as Nvidia would flay them to the bone to get that $40 billion it went into debt to get back so it can throw the money lenders off their back.

Why would Nvidia be able to sell to Apple at a higher price than the price ARM is currently selling at to Apple?

aurizon3• 5 years ago

If Nvidia instructs ARM to do so, as 100% owner...

wyuenho2• 5 years ago

I don't understand why Softbank won't just put it back to the public market and list on the LSE.

ryebit• 5 years ago

Good Lord, that's a great idea. They'd be able to sell the shares in no time. Soon as it hits public I'm sure a ton of folks who just invest in everything semiconductor would just jump in.

I've been avoiding SoftBank because they've got so many other risky ventures, putting money in company at large seems kinda volatile.

burgerquizz• 5 years ago

I've been checking the semi conductor space. What semi companies aren't overvalued with a decent P/E ratio right now? Was thinking to just take an ETF like SMH[1], but wondering if there were a better choice. TSMC, Applied Materials, ASML, Nvidia, etc... had crazy run and I'm wondering if they can keep growing that much in the next years.

[1] https://www.vaneck.com/etf/equity/smh/holdings/

id• 5 years ago

I'm sure a ton of folks who just invest in everything semiconductor would just jump in.

I'm sure a ton of folks would just jump in because everyone would be jumping in.

tcldr• 5 years ago

Absolutely. I really would like to understand why Soft Bank don’t do this. UK gov should do everything it can to encourage.

StringyBob• 5 years ago

2020 was a long year - this was just 6 months ago: https://www.spglobal.com/marketintelligence/en/news-insights...

Havoc2• 5 years ago

You can get better money if you sell a strategic asset as a whole rather than throwing it onto the public market & all the red tape, PR and control dilution that entails

michaelt2• 5 years ago

ARM is 100% equipped to deal with red tape and PR; it was public until 2016 when SoftBank brought it.

wyuenho2• 5 years ago

The problem right now is this strategic asset is so strategic for everyone, Softbank can't sell it to any single entity unless there's some guarantee of ARM's continued independence and impartiality.

ksec6• 5 years ago

They will have a hard time to try and convince the public to buy ARM's shares at P/E 100.

twic• 5 years ago

Even better - direct listing on WallStreetBets.

stjohnswarts5• 5 years ago

A potential merger with Game Stop?

ur-whale• 5 years ago

I don't understand why Softbank won't just put it back to the public market and list on the LSE.

Softbank is a grossly mismanaged shitshow fueled by an endless money well of Saudi money.

Don't expect it to be behaving rationally.

mumblemumble• 5 years ago

This actually seems rational to me. They grossly overpaid for ARM, and selling it on the public market may well end up being another huge and embarrassing write-down. On the private market, though, they had a shot at finding a buyer to whom ARM was worth more than its value as an independent company.

Of course, given the kind of company that ARM is, any such buyer is going to be, almost by definition, an antitrust situation. So maybe it never could get past regulators. But, from a purely self-interested standpoint, it makes sense for them to try.

robert_foss3• 5 years ago

I can think of no worse owner of ARM in this industry, with the possible exception of Qualcomm.

If NVidia indeed wants to have a real foothold in the CPU space, we would all be much better off if they went the RISC-V route.

nicoburns3• 5 years ago

we would all be much better off if they went the RISC-V route

Or indeed just license ARM like everyone else. It's not like they can't use ARM without buying them.

dralley• 5 years ago

Nvidia already has an ARM license, even.

m-p-3• 5 years ago

But if they own it they'll have the sweet licensing money coming in.

yehaaa• 5 years ago

Exactly, which raises the question why they are interested in buying Arm to begin with. A public statement is in the article:

"With its proposed acquisition of Arm, NVIDIA will be able to turn new AI possibilities into realities much faster."

Which doesn’t make much sense to me, unless they wish to change aspects of Arm that is currently outside of any license.

freeAgent• 5 years ago

They already have ARM SoCs which are used in their own Shield TV and other devices.

PaulHoule• 5 years ago

I think this acq was about this: back in the old days Masayoshi Son would have found a knife in his room and been expected to use it on himself if he hadn't been able to find a lot of money quick to handle redemptions in the vision fund.

Thus whoever bought ARM was doing him a big personal favor that would ultimately get repaid. NVIDIA does not need or want ARM but Son pretty much owes Huang his life now.

(Patronage Networks are a good master narriative for how any society works.)

Keyframe• 5 years ago

I think it's more of Nvidia wants to get into ARM's sales channels. CPU side of things is additional benefit.

robert_foss3• 5 years ago

The things is that NVidia by being a competitor in many spaces, would wreck those very same sales channels.

odiroot• 5 years ago

How about Broadcom (assuming they'd be big enough)?

robert_foss3• 5 years ago

Yeah, that would be pretty shit. But Broadcom has been reinventing itself as an IP company, so at least it wouldnt be a terrible match.

AntiImperialist• 5 years ago

I can think of one worse owner of ARM: AMD. Make that two: Intel.

ckdarby• 5 years ago

I can think of no worse owner of ARM in this industry

Can you further expand on this? I didn't see any evidence or even opinions backing this in the comment.

datameta• 5 years ago

ARM made an architecture and CPU/GPU designs for others. They really had no stake in the chip making game, instead having others - Samsung, Apple, Qualcomm, Huawei, Mediatek, Rockchip, etc make the chip (that being a list of competitors for Nvidia). Their business model was in making the ARM ecosystem available for all manufacturers (including Nvidia) in order to sell licenses. This, I think, is the primary reason ARM chips dominate at this moment.

tsomctl2• 5 years ago

ARM makes their money by licensing the design to other huge companies, who then integrate the processor with other peripherals and manufacture it. They have no interest in extracting money from the end user, instead the documentation is readily available. In comparison, Nvidia, for example, sells you a video card, then you have to pay them again for a license to do deep learning. Oracle requires the end user of Java to pay a license to use the JRE. The fear is that if Qualcomm or Nvidia buy ARM, they're going to turn ARM into a similar business model where they try to nickel and dime the end user for everything.

rektide• 5 years ago

Nvidia as a company is notorious for keeping a tyrannical grip on their customers, systems, & hardware. CUDA is a wonderful software stack, with massive hardware adoption... tied very strongly to Nvidia hardware. Nvidia GPUs are wonderful pieces of hardware... with frustrating Linux drivers, dogged resistance to open-source driver efforts, & a history of resisting mainstream collaboration & doing things themselves (their EGLStreams vs DMA-BUF/GBM, which, after half a decade+ of making Nvidia on Linux semi-useless, is finally showing signs of retreat. i'll allow that their devs may have had some points, perhaps?). Nvidia is one of the only companies with a proprietary interlink system, NVLink, whereas historically IBM (OpenCAPI), HP (GenZ), AMD (not anymore alas, with HyperTransport giving way to Infinity Fabric, so sad), great collaborations (CCIX/CXL), countless others promoted & used open interlinks, neutral technology that enabled & drove innovation & jump started the personal computer revolution ("gang of nine"[1]). Nvidia releases no documentation for their chips. If you buy a Nvidia computer- very powerful, energy efficient dev boards- Linux4Tegra is expected, woe be unto those who try to venture out & use the common Linux distros they already know & love.

In Stratchery's wonderful write up of how quixotic & weird & strange the Nvidia acquisition of ARM seems[2], Ben highlights CEO Haung's core interesting idea of this acquisition:

"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."

And I'd love to expound on how weird, how strange this sounds. But Ben's done it far better than I could:

"Notice that last bit: Huang is not only arguing that Nvidia will serve Arm customers neutrally, but that Nvidia itself will adopt Arm’s business model, licensing its IP to competitive chip-makers. It’s as if this is an acquisition in reverse: the $318 billion acquirer is fitting itself into a world defined by its $40 billion acquisition.

Color me skeptical; not only is Nvidia’s entire business predicated on selling high margin chips differentiated by highly integrated software, but Nvidia’s entire approach to the market is about doing what is best for Nvidia, without much concern for partners or, frankly customers. It is a luxury afforded those that are clearly best in class, which by extension means that sharing is anathema; why trade high margins at the top of the market for low margins and the headache of serving everyone?"

I would LOVE to see Nvidia acquire arm & gain a soul, figure out what it means to innovate, openly, to drive tech forward while working hand in hand with others to see it get adopted & grow & thrive, in ways far beyond their own limited control & vision. Nvidia is up to great things, has such an amazing mastery of high technology that so few share, building amazing chips, releasing amazing products. They are so integrative, building great chips (gpus & cpus both), building ways to make chips work together (nvlink), building consumer electronics (shield tablet, shield tv), building ultra-dense servers (dgx).

But they do not share. "Take what you can, give nothing back!" is how a lot of people feel about Nvidia, and on many days I share that view. It's so hard to imagine. It would be such a change.

Ben tails the end of his write-up with a wonderful question posed to Huang, why does Nvidia need to own ARM? Huang comes up with great answers, seems very thoughtful, and I am excited to see his future, as he talks about it happen. But it would not be Nvidia as we know it any more doing this. The company would need to be reborn, be something else. Huang seems to get that, he sees and says that, but it seems just so much more probable that the real end would be a miserly, sad fate for ARM, performance going up yes, but control & closeness shutting down the relevance & interestingness & availability & affordability.

[1] https://en.wikipedia.org/wiki/Extended_Industry_Standard_Arc...

[2] https://stratechery.com/2020/nvidias-integration-dreams/

HissingMachine• 5 years ago

ARM is unique that there aren't many companies that could own it and it being a raw deal, it would have to be a company that doesn't have rivals in semiconductor or hardware space, so that basically rules out even buyers like Google or Microsoft. What that leaves are investment companies like Softbank or Berkshire, everything else is hurting someone.

ineedasername2• 5 years ago

Or just let it go public. It doesn't have to be owned by anyone else.

QuinnyPig• 5 years ago

Intel or Oracle would be two.

kevingadd2• 5 years ago

They already sell hundreds of millions of units of their SoCs - the Nintendo Switch runs on an (ARM-based) NV SoC for one example and has sold over 70 million units.

seabrookmx• 5 years ago

Lots of Nvidia SoCs in cars too, Tesla's being one example.

captaincrowbar• 5 years ago

"Why don't they just switch to RISC-V?" is the new "This will be the year of Linux on the desktop".

stjohnswarts5• 5 years ago

Intel would also be a bad merger.

Abishek_Muthian• 5 years ago

In announcing the agreement, the two companies, citing a need to get the green light from regulators in many countries, including the U.K., China, the European Union and the U.S.,

It's hard to believe U.S. authorities weren't consulted by Nvidia before taking credible action towards this deal, I doubt whether there will be even real hurdles from the Govt. for Nvidia as ARM is a strategic asset. For the same reason, I don't see hurdles from U.K., EU to last long either.

But there's a new administration now and if anti-trust did take it up due to pressure from Apple, Qualcomm and likes then there will be real test between free-market regulations vs national interest.

nabla9• 5 years ago

The deal is not finished. It has explicit condition covering disapproval.

Nvidia buys ARM only if the deal gets regulatory approvals approvals. If not, the deal is off.

The proposed transaction is subject to customary closing conditions, including the receipt of regulatory approvals for the U.K., China, the European Union and the United States. Completion of the transaction is expected to take place in approximately 18 months.

https://nvidianews.nvidia.com/news/nvidia-to-acquire-arm-for...

klelatti7• 5 years ago

If Nvidia saw the opportunity to buy Arm they would make an offer and then try to get through antitrust regulators - and regulators very unlikely to give a green light in advance of a deal being announced.

The UK regulator has already set out very credible reasons why the deal might be objectionable in advance of doing their investigation - and those same reasons apply in the US and EU too - so every reason why

https://www.gov.uk/government/news/cma-to-investigate-nvidia...

mromanuk• 5 years ago

I hope Arm continue to be independent, it's too important

Ceezy• 5 years ago

You got to love Masa Son but he is really pulling strange moves lately... ARM is doing really cool stuff merging them with NVIDIA is a terrible idea.

klelatti7• 5 years ago

The CMA will look at the deal’s possible effect on competition in the UK. The CMA is likely to consider whether, following the takeover, Arm has an incentive to withdraw, raise prices or reduce the quality of its IP licensing services to NVIDIA’s rivals.

This is from the UK's Competition and Markets Authority (UK's antitrust regulator) web page [1] on this takeover and captures the key issue precisely.

Nvidia has every incentive withdraw, raise prices or reduce the quality of its IP licensing services to NVIDIA’s rivals because this would help NVIDIA's own products (current and future) and NVIDIA makes a lot more on its own products than Arm makes on licenses.

I'd also add that there is almost no way that this could be properly policed post takeover.

[1] https://www.gov.uk/government/news/cma-to-investigate-nvidia...

skibz• 5 years ago

I couldn’t find a link to Hermann Hauser’s open letter to the UK prime minister in the article. Here it is:

https://www.savearm.co.uk/

klelatti7• 5 years ago

Thanks. Interesting proposal at the end:

The obvious and highly desirable alternative to the Nvidia deal is for the government to use its convening power to lead a syndicate of ARM licensees, UK pension funds and other institutions to take ARM public on the LSE + NYSE or Shanghai Star market and take a golden share so that we are never again in this invidious situation of having to fight to keep our own UK technology assets.

ausjke2• 5 years ago

Suppose if the sale did not succeed, what will happen to Nvidia's high-flying stocks partially caused by this merger? I don't own Nvida stocks, just be curious

01100011• 5 years ago

IIRC, the stock is actually down since the announcement. Nvidia is buying ARM because of its high stock price. The stock already ran up thanks to the AI boom.

Honestly, I work at NVDA and I think the deal is dumb. I don't see what benefit it brings to us. The industry is beginning to move away from ARM, so buying yesterday's technology seems like a bad move.

ausjke2• 5 years ago

You're right, it does not seem ARM-acquisition helped or damaged NVDA stock both ways over the past 5 months.

"Moving away from ARM", to where? X86 does not seem like a good destination, RISC V is not there, MIPS/AI-chips etc are not a trend either, I honestly don't know where else the CPU industry can move to.

noncoml2• 5 years ago

What’s in your opinion the reason Arm became the defacto choice for embedded systems? (And now making ways to general computing)

In what ways was it so much better than MIPS that it virtually wiped it off the board?

klelatti7• 5 years ago

You can hear it from John Hennessey of MIPS fame himself.

"We made a mistake. We didn't realise how important the cellphone market was"

https://youtu.be/3paiCK3dlK0?t=3016

noncoml2• 5 years ago

Very interesting, thanks. The guy to the right of him is completely in denial. He was so confident MIPS "will win in the end"

klelatti7• 5 years ago

Just to add on a more detailed level I think it was Thumb with its better code density that first got them into (Nokia) cellphones. Also, I think Arm long explicitly avoided competing with Intel which they saw (then) correctly as a losing strategy.

jononor• 5 years ago

The fact that many semiconductor different companies brought ARM based products to market, each with their own set of peripherals, hardware reference designs and SDKs targeting different verticals (in different ways). This huge variety of available off-the-shelf designs makes it possible to make cost-effective products with low investments and fast time-to-market. A CPU core alone is not enough, one needs the ecosystem and ARM understood that from very early on.

pid_0• 5 years ago

Good, as it should. No company that competes with ARM customers should ever own ARM.

varispeed• 5 years ago

It's like selling it to Apple. I hope this will be stopped.

naruvimama• 5 years ago

ARM's revenue is stagnant. it may not be a sustainable business on it's own.

Nvidia wants access to ARM's large customer base to sell it's own IP in GPU, AI accelerators.

Intel had a dominant position x86 for decades which they also licensed to AMD.

However, today we have open RISCV, open MIPS & several huge tech giants and cloud computing providers willing to invest in these alternatives. Not to mention that several of these like Apple have a perpetual ARM license which will not be affected by this acquisition.

This should be a welcome move especially for those who are looking for greater investments in RISCV.

klelatti7• 5 years ago

So you're saying it's great because Arm's customers will be forced to abandon their investment in Arm products.

In other words dreadful for Arm's customers and their end users.

(I want RISC-V to succeed but this isn't the way to do it)

crb002• 5 years ago

If they want liquidity, sell 2/3 on the open market. Allow NVIDIA etc to buy up to 10% with their own stock instead of cash. Softbank isn't going to clear regulatory hurdles in a monopoly premium sale.

SoftBank’s plan to sell Arm to Nvidia is hitting antitrust wall around the world

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