Analysis: Bad for everyone else
Nvidia takes over ARM, at least it announces its intention and the market and the stock skyrockets, proving that this is an excellent move for Nvidia. Still, a semiconductor company taking over what used to be an independent API provider doesn’t resonate well.
Since the Monday announcement, the hell rose. Everyone wanted to get on top of things, elaborate if this is good or bad, and based on over a dozen conversations with industry veterans, colleagues, and key members, everyone outside Nvidia and ARM concludes that this is a bad thing for the industry.
First and foremost, a big chip company will control ARM and the direction where the company is going. Nvidia is repeatedly saying it won’t, but we know Jensen better than that. ARM is known for its somewhat fragile and barely profitable business model, while Nvidia aims to 65 percent margins if not higher.
Based on this, things will change for everyone but not in the short run.
I will just touch a bit, and there will be more to say about this matter, but Nvidia expects to get the regulatory approval within 18 months. The way things are with the current US administration and China, we cannot foresee a positive outcome. There might be a change in US administration after the upcoming election, but the relationship with China and the US threat to Huawei won’t be an easy thing to fix.
China’s regulatory agency has to approve the merger, and so does other dozen. EU, Korea, the US, Japan, and Taiwan are the dominant ones. Just remember that Qualcomm had to drop $65B NXP acquisition as China just kept stalling as that is way less relevant than Nvidia ARM.
It will be easy to point out how the chip company that owns one of the most valuable sets of IPs in the world can abuse its power. Apple certainly cannot like this as it doesn’t even want to buy GPUs from Nvidia, even though they know Nvidia is a better denominator in the market.
Nvidia’s Jensen win
One other common theme we heard from industry veterans was that Jensen would find a way to make this work. I know Jensen and a lot from Nvidia upper management team, but unfortunately, the regulatory game they will get into might just be a too big cake to swallow. The decision upon approval will be bigger than Nvidia and ARM, or IT. It will be geo strategical.
I still don’t believe that SoftBank got approval from the EU and UK in the first place, as this was simply a big loss for the EU and at that time, its member, the United Kingdom. Have min mind that SoftBank is a bank that wanted to gain profit, while Nvidia is a chip company that is one of ARM’s customers.
SoftBank gained some cash to save a bit of its face after the WeWork debacle, but it is questionable if this was a good deal with years of headcount increase and marginal profit advancements.
The best comes at last, even without Nvidia acquisition, ARM already notified its key accounts that its ARM V9 IP licensing will cost significantly more compared to the V8. What a delight, and with Nvidia on board, one can just imagine.
As Mike reported at least Semiconductor analyst Malcolm Penn agrees with my view.
The main winner of this uncertainty is SiFive (Risc V) alternative architecture. This is a developing story, more to come.