Arm's acquisition was finally defeated.

On September 14, 2020, NVIDIA officially announced that it would purchase arm, a semiconductor design company of Softbank group, for us $40 billion (about RMB 273.32 billion). NVIDIA will pay US $21.5 billion worth of NVIDIA shares and US $12 billion in cash, including US $2 billion immediately paid.

If the deal goes ahead, it will be the largest acquisition in the history of the semiconductor industry. For NVIDIA, 40 billion is also a huge sum of money. At present, the market value of NVIDIA is about 300.2 billion US dollars, while the annual sales volume in 2019 is 10.918 billion US dollars. The acquisition of mellanox in April this year is the largest acquisition so far, with an amount of 6.9 billion US dollars. Now this number has been refreshed to 40 billion dollars.

The soap opera that arm sells seems to have finally come to an end. In 2016, Softbank bought arm at a price of $32 billion, and at that time, the market value of NVIDIA was almost in this range; now, the market value of NVIDIA has increased nearly ten times, while the sale price of arm has only increased by less than 10 billion US dollars, which also makes it possible for NVIDIA to acquire arm.

With the huge volume and influence of arm today, if the transaction is completed, we will witness the birth of a semiconductor giant.

Can we get together by complementing each other?

NVIDIA is one of the hottest companies in the technology industry today. In July this year, NVIDIA surpassed Intel for the first time to become the chip manufacturer with the highest market value in the United States and the third largest semiconductor manufacturer in the world, leading Intel by nearly 100 billion in market value.

Let's forget about the game. The old business is still stable. NVIDIA CEO Huang Renxun has clearly stated in the previous financial report meeting that the second half of 2020 is likely to be one of the best game seasons in history. In the latest financial report of the first quarter, the data center business has surpassed games and become NVIDIA's largest source of revenue. Among the global top 500 supercomputers, 8 of the top 10 households are NVIDIA's GPUs. The rising of data center and the telling of auto driving, AI and other stories all support the market's expectation of NVIDIA's business development space.

NVIDIA has previously launched Tegra series processors based on ARM architecture, but has failed in mobile platforms such as mobile phones and tablets. However, Tegra is still active without mobile phones. For example, Nintendo's switch has adopted customized TEGRA X1 chip. As of December 31, 2019, the switch mainframe has sold 52.48 million units worldwide. In terms of vehicle engine, Audi, BMW, Tesla and other car companies have many car system chips (mainly navigation and entertainment) from NVIDIA Tegra, now the autonomous driving business that NVIDIA vigorously develops, relies on Tegra as well. There is no problem in the cooperation between NVIDIA and arm.

At present, NVIDIA has almost no share in smart phones, tablet, TV, IOT and other fields, and the direct acquisition of arm is expected to fill the gap in this part; on the contrary, although the mobile terminal is already the dominant level, there are almost no customers in the fields of desktop CPU, GPU and data center, which is the old line of NVIDIA. Similar character or complementary character is more suitable to be together? NVIDIA and arm think it's the latter.

There is not much overlap between the two sides, so there is more room for imagination. If the deal eventually does, NVIDIA will become a company in IP licensing and design, data center and games. Mobile, PC and server, autonomous driving, AI, 5g, IOT and other fields have leading layout of super semiconductor enterprises.

In the short term, it's good for sales and business. It is mentioned in the agreement that NVIDIA will expand arm's original IP authorization strategy, and it is not impossible to bundle a whole family barrel for you in the future.

Who should be afraid?

Forbes puts forward several ideas

Larger CPU, GPU, NPU and network data center combination

Combination of cpu-gpu-npu for HPC market and shared memory system

NVIDIA based GPU / NPU IP for smartphones and tablets

Arm based SoC for windows notebook

Arm based large core CPU can provide the highest performance Windows desktop

Any combination seems worth studying.

Most directly, arm plus NVIDIA will put a lot of pressure on X86. ARM SoC may be supported by NVIDIA GPU in the future, and even directly bring arm to high-performance desktop computers like apple. In terms of servers and data centers, GPU is increasingly used as an accelerator, which makes Intel's old banks face great pressure. X86 architecture on servers is still the mainstream, but arm is still the mainstream Together with NVIDIA, we directly killed the base of Intel.

Besides Intel, Qualcomm should be nervous about this. Qualcomm has already defeated NVIDIA in the mobile terminal war, becoming the biggest winner in this field, squeezing Tegra into the edge business. With the acquisition of arm, NVIDIA can regain its ambition to return to the mobile field. Tegra's mobile phone returns? It's not impossible.

In addition, after the acquisition of arm, NVIDIA will further open the gap with AMD. Although the latter has been popular recently, what arm can bring to NVIDIA is obviously beyond AMD's reach.

There is a lot of resistance

It may seem like a good deal, but it's not easy to make a good deal if it's too good. The deal is subject to rigorous scrutiny and approval from China, the US, the European Union and the UK, with regulatory approval expected to take 18 months. Governments, antitrust authorities, and companies that once competed and cooperated are all obstacles to this super deal.

In this regard, Huang Renxun said that he liked arm's business model and hoped to expand its extensive customer base. Huang stressed that NVIDIA had spent a lot of money on the acquisition and had no motivation to do anything that would lead to customer deviation.

UK authorities also need to consider the impact of acquisitions, after all, arm is one of the most important companies in the UK's technology industry. To this end, NVIDIA stressed in the statement that arm's headquarters will continue to be located in Cambridge, and will once again build the most advanced AI supercomputer driven by ARM CPU, which will support arm's Cambridge headquarters to become a world-class technology center. In addition, arm's intellectual property rights will continue to be registered in the UK.

When arm became an American company, it was not good news for China's technology industry. Previously, TSMC has been unable to provide OEM services for Huawei. Hisilicon and other enterprises have obtained permanent authorization of arm V8. When NVIDIA becomes an American company, it will be more difficult to authorize in the future, and even the design ability will be locked up. After all, Hisilicon and other enterprises use the arm public version architecture.

The latter is the only joint venture in China. Prior to this, the acquisition of NXP by Qualcomm (US $44 billion, the largest acquisition in the semiconductor industry before arm's acquisition) was rejected by China. NVIDIA and arm have to face the same pressure.

There is a risk that this transaction will be rejected. It is not easy for a platform company like arm to find a suitable seller. But no matter how, it will be one of the most important nodes in the semiconductor industry in recent years, with far-reaching influence.