SoftBank is in advanced talks with US chip company Nvidia to sell Arm – with a price in the region of £32bn reportedly being thrown around. But Nvidia’s purchase of the Cambridge-based chip designer would not only strike a blow to the UK’s technological sovereignty, but would result in the destruction of Arm itself, Arm co-founder Hermann Hauser has claimed.
Nvidia recently overtook Intel as the most valuable microprocessor company in the world, and its great wealth right now provides it a unique opportunity, says Hauser. “They are the semiconductor company that can buy Arm to destroy it – and it is very much in its interest to destroy Arm because they [would] gain a lot more than the 40bn that they pay for it,” he claims.
Hauser says the acquisition would allow Nvidia to swipe “the microprocessor crown from Intel”, and become the chip supplier for 95 per cent of mobile phones, 90 per cent of embedded controllers for the internet of things, as well as taking the PC and data centre markets.
Hauser spun off Arm from Acorn Computers in 1990. The company designs semiconductor chips that are customised by other companies for various different purposes. Its designs are currently used in billions of smartphones around the world.
Hauser says that an Arm acquisition is a means for Nvidia to become the dominant microprocessor company in the world, “at the same time as they can prevent their main competitors” from making use of further Arm developments. Instead, competitors would need to “scramble” to create their own architecture, handing Nvidia the edge.
Nvidia and SoftBank declined to comment. Arm said it does not comment on speculation.
Up until now, Arm’s business model is acting as the “Switzerland of the semiconductor industry” – maintaining relations with many customers around the world. “Most of them of course, are competitors of Nvidia,” says Hauser. Japanese technology investment firm SoftBank acquired Arm in 2016, but ensured the company’s continued neutrality.
California-based Nvidia currently specialises in GPUs (graphical processing units) that were originally used primarily in gaming, but have since found a range of applications in AI, cryptocurrency mining and scientific research. In data centres, they are now used for the data-intensive process of training AI systems.
However, the company doesn’t have the CPU (central processing unit) firepower that is still largely Intel’s domain. The purchase of Arm is seen as a means of both strengthening the company’s position in the data centre market, as well as entering new markets such as smartphones and IoT.
Nvidia already licenses IP from Arm, meaning that it wouldn’t necessarily need to acquire Arm to gain anything it doesn’t already have. The acquisition would likely rile competitors, because it would mean that in addition to selling its own chips, Nvidia would be licensing IP to other companies too. For these reasons, the acquisition would attract competition scrutiny, but perhaps not before the sale goes through.
Another Arm co-founder, Tudor Brown, previously told NS Tech that he couldn’t imagine why any company would want to buy Arm if it wasn’t seeking to give itself an unfair advantage such as “early access” or to “deprive the other guys from having whatever innovations were to take place”.
Aside from the existential threat to Arm, Hauser is “most incensed” by the prospect that if Arm becomes a sub-division of Nvidia, it will fall under the jurisdiction of the US’s Committee on Foreign Investment (CFIUS). This interagency committee reviews transactions involving foreign investments in the US, and can reject these on the grounds of national security.
However, Hauser fears that CFIUS regulation could be applied more broadly than this. “If the president decides Britain doesn’t deserve to have any more microprocessors, then he can decide that Britain isn’t allowed to use its own microprocessors,” he says, adding that “these decisions should be made in Downing Street, not in the White House”.
He advocates the UK government stepping in to prevent the sale, pointing out the UK government has its own – albeit less “vicious” – regulation that is comparable to CFIUS. The UK government exerts some sovereignty over companies inside the UK, and can decide it’s in the country’s interest for Arm to remain a UK company.
On the matter, a spokesperson from the Business, Energy and Industrial Strategy department said in a statement: “While proposed acquisitions are primarily a commercial matter for the parties concerned, the Government monitors these closely.
“Where a takeover represents a threat to national security or financial stability, the Government will not hesitate to investigate the matter further, which could lead to conditions on the deal or a decision to block it all together.”
Hauser says that outside a legal framework, the UK government assisting the company to go public could offer an alternative route. SoftBank has always said it’s keen for Arm to IPO, and said this option was still on the table as recently as August.
“The government can help with, say, a billion or two,” says Hauser. “They’ve spent 500 million on OneWeb, so they ought to be able to spend a billion or two” in order to get Arm “listed on the London Stock Exchange and make it a British company again”.
Hauser says he believes this is unlikely however, because prime minister Boris Johnson is intent on remaining on the right side of president Trump while a post-Brexit trade agreement with the US is still pending.
The Telegraph reported on Friday that the UK government is expected to disregard calls for intervention into the deal, because acquisitions are generally only rejected on national security grounds and the US is an ally.
Hauser says that despite voting against the SoftBank takeover of Arm, SoftBank founder Masayoshi Son has been true to his word in his stewardship of Arm. He says that Son called him at the time and said that he would preserve Arm’s business model, management and allow the company to grow with further investments.
“He’s been true to his word; he’s done everything that he said he would,” says Hauser. However, Hauser was still troubled by the prospect of what is now coming to pass – that one day things would change.
SoftBank has been candid about seeking cash for its post-Covid recovery, as well as to off-set the recent underperformance of some big investments like WeWork. An Arm sale would provide the firm with a large cash injection.
Brown claims that SoftBank mishandled Arm’s business – diversifying the product lines and investing too much money into the company. SoftBank prioritised Arm’s move into the IoT market that didn’t entirely pay off. Under SoftBank, Arm’s annual revenues rose from $1.2bn to just $1.9bn since the 2016 purchase.