The semiconductor supply chain is now almost completely disaggregated ie everyone specialises in just a small part of the value chain. ARM’s speciality is in CPU design and it has carved out for itself the enviable position of being the defacto standard for mobile applications - almost every single phone on the planet has ARM processor(s) running it. And their products are in dozens of other end applications segments as well. These chips are embedded in System on Chip IC’s and manufactured by third party companies like TSMC and UMC etc to end customer specifications, like Apple or Samsung for example.
The problem with the original SoftBank deal, and now the Nvidia deal, is that these companies will simply hollow ARM out (slash R&D, cut staff etc) to pump up the target’s value, before flogging it off or breaking it up. The stock market doesn’t value synergies, although it is quite happy to punt this aspect when M&A deals are in the offing. Given its strategic position as the defacto standard for mobile comms, that’s a serious threat.
ARM also gives the UK strategic leverage in any trade negotiations. Would we knowingly allow Rolls-Royce Jet Engines to be flogged off? No. Ditto ARM.
So, I think this is the right policy and hopefully the government will see fit to step into other deals like this and block them.
I’ve been through a PE acquisition. We were stripped bare and bits sold off before finally getting our mojo back. I benefited handsomely but we were not the company we were before and the job losses in the process were huge. It will be no different with Nvidia’s proposed take over of ARM.
(disclaimer: I was a semiconductor executive in a global MNC).
> these companies will simply hollow ARM out (slash R&D, cut staff etc) to pump up the target’s value, before flogging it off or breaking it up.
That's a very real concern with Softbank (and why I questioned why regulators were allowing the acquisition in the first place). I don't think you can be any further from the mark implying that's Nvidia's plan. Nvidia wants ARM to flourish, they would have no interest in killing it or selling it off once acquired. They already use ARM tech in their Tegra CPUs, and in the "Smart" NICs they acquired with Mellanox. Additionally they pre-announced a datacenter focused ARM chip just last week.
They would have absolutely nothing to gain and a ton to lose if they were to kill off ARM or gut the technical talent.
>ARM can't flourish under Nvidia, which vendor would prefer to buy IP from direct competitor rather than from a neutral provider.
I would imagine plenty. Take a look at the list of vendors that sell Nvidia GPUs despite the fact that Nvidia sells directly into the market.
>The ecosystem business model that defines Arm simply doesn't have any space for them being perceived as biased this way or that way.
I don't know, Intel's recent announcement that they're going to start licensing their IP directly contradicts that. I don't think Intel would waste what will likely be a fairly large amount of money spinning up a new business unit without first doing some market research and ensuring there's demand for it.
When you're thirsty, you buy from the person selling water. I don't think you'll find a lot of love lost between the OXMs and nvidia. I'm sure they would love more competitors in the space.
We have people licensing Arm and building interesting CPUs (Ampere).
I'm not sure that the NVIDIA acquisition would be good for the market or for Arm.
You haven't explained why Intel is entering the licensing business. If vendors have no desire to get their licensing from a company that competes in the space, there should be no demand for licensing from Intel, all of those OXMs should be going to ARM.
The thing about Nvidia is they have spent a lot of money creating a kind of chip+ecosystem situation that is unique and superior to all that's out there. And they charge a gruesome premium on that and use product and license differentiation to extract the maximum in each submarket. It's logical and perhaps necessary strategy to get a return on their huge investment. But it is just as logical that everyone hates them. This is what successful investment leading to a unique technology leading to a monopoly position looks like.
Intel once was in a similar position to Nvidia and everyone hated them then. The failure of their last few generation has meant they don't have as strong a monopoly position and so have to start taking a more conciliatory position with the market. I don't know if they're succeeding here but it's obvious they've been "humbled".
Now, maybe Nvidia will treat ARM completely differently than it's GPUs. But companies tend to have single cultures and so it's easy to imagine Nvidia squeezing dimes from other ARM customers, where ARM has been at the opposite side of the market, reasonably priced, good-enough tech. Charging a high premium on your capital investment works for a market leader, that uses the money for more investment. But for a market followers, the same strategy results in market share shrinking 'till the whole thing dies (not that this isn't a way to make money but when the thing dies, some people are unhappy).
Nor have we seen any serious uptake of Intels licensing business. It's a paper launch.
Adding to that Intel didn't exactly pick this model as their first choice. The combination of a wafer production shortage and Intels CPUs underperforming is what drove Intel to this. It is neither Intels or most feasible clients first choice.
They absolutely have people signing up, none of it has been publicly announced (that I've seen) but we already know they were doing custom designs for Facebook/Amazon/MS so they would be logical first-takers.
> which customer would prefer to buy IP from a potential competitor rather than from a neutral provider.
The same customers that buy NVIDIA GPUs, NVIDIA interconnects, support NVIDIA's software, etc.
You seem to be suggesting that this "somehow" matters, but are not explaining "why" do you think this matters.
AFAICT if AMD wants to ship a data-center node, it needs Mellanox interconnect, and has to buy that from NVIDIA, pretty much in the same way that NVIDIA ships AMD CPUs with their DGX boxes.
There are dozens of thousands of pattents that all these companies need to buy from each other on a regular basis to function.
I don't see how this particular change makes the status quo worse.
Power consumption is a key application requirement for mobile. I don’t know that GPU’s are designed to run on the smell of an oil rag which the ARM processor cores do.
The companies that directly compete with Nvidia (AMD & Intel) are not ARM customers. ARM's biggest customers are mobile phones, which could benefit from an Nvidia GPU
Qualcomm is a direct competitor of NVIDIA (e.g. for automotive and robotics) and an important ARM customer.
Until now the competing products of NVIDIA and Qualcomm differed in NVIDIA having worse CPUs and better GPUs and Qualcomm having better (ARM-designed) CPUs and worse GPUs.
I do not find it believable that in the future NVIDIA would ever provide Qualcomm with better CPUs than those of NVIDIA products.
Given NVIDIA's desire of dominating the datacenters, it is also hard to believe that they will give to all other companies who will attempt to design server CPUs new ARM cores at the same time when they will be available for the internal NVIDIA design teams.
ARM does not make CPUs (it makes CPU IP), Qualcomm does.
The fact that NVIDIA builds bad ARM CPUs does not change with the acquisition as far as I can tell.
For that NVIDIA would need to invest a lot of R&D into their CPU team, and again, if it does that, it can compete with Qualcomm, independently of whether the acquisition takes place.
Considering how well Apple's M1 is performing, I suspect within 10 years the majority of new desktops and laptops sold will be ARM-based, with both Intel and AMD having to either adapt or languish.
I think this is accurate if we see a substantial uptake of cloud/remote services for what are currently the most common high demand compute consumer devices (Game consoles + PC). ARM is already proving to be a winner in the datacenter as it becomes available so it seems all but inevitable.
I think the overall trend is still accurate and in either case ARM + Nvidia is (or would be) a compelling provider of hardware but the segment of the market that needs/relies on X86 architecture does seem to be shrinking.
ARM is used across a huge array of end market segments. Granted, none are as big as mobile, but they’re important nonetheless. To say that all ARM SoC vendors are competitors is therefore not strictly true.
This reminds of the analyst who predicted AMD’s acquisition of ATI would kill off Intel. Nothing of the sort happened.
If a chip supplier like Nvidia buys ARM and uses its products, it will ultimately have an outsize say over ARM’s product (actually IP) roadmaps. That’s not going to make ARM’s current customers happy. Nvidia want to diversify- that’s why they’ve targeted ARM. They don’t need the technology- it’s readily available to licence.
Arm is valued at $40 billion on c. $ 2 billion in annual sales while Nvidia is valued at > $300 billion on $ 16 billion in sales. With a valuation of 300 billion, why buy ARM and almost certainly damage the ARM business model which is as an independent processor IP provider?
And how will Huawei (and China), big ARM licensees, react to ARM being owned by a US company given the bad blood in that area.
For ARM, it’s a strategic disaster IMV. Better to stay independent!
> why buy ARM and almost certainly damage the ARM business model which is as an independent processor IP provider?
That's the 40 billion dollar question, isn't it. Why are they doing this?
I don't know, I guess they know something that I don't.
What do you know that we don't ? :D
> For ARM, it’s a strategic disaster IMV. Better to stay independent!
How do you arrive at this conclusion?
For all we know NVIDIA might (1) invest a lot more money into ARM, (2) improve their ecosystem, (3) start licensing their IP to third parties as well using a similar model to ARM, (4) start contributing more to open source like ARM does, etc.
You have not given a single strategic imperative for the Nvidia acquisition. They have full access to the IP.
The real issue here is Nvidia are hugely overvalued thanks to the vagaries of the US tech stock market and the ‘irrational exuberance’ that surrounds it. Just a short while ago, Tesla was valued at over $800 billion, Apple has topped a trillion and now Nvidia on $16 billion sales at >$300 billion. As a result that have a while loymtvof stock value burning a hole in their pocket and are looking for something to buy. Unfortunately, ARM is in the frame.
When you make an acquisition, you have to ask whether it positions the combined business uniquely, will is cannibalise existing business (in this case almost certainly because ARM’s great appeal besides its IP and eco-system is that it is independent), will it move the stock price in the right direction, will it improve EBIT, what are the synergies etc etc. A typical M&A will invoke dozens of considerations like this.
More investment into ARM? They own the mobile phone space - Apple, Samsung and almost every other brand (many in China where I worked for a few years). They’ve seen off Microchip in the general purpose 32 bit uC space and dominate IoT applications, Bluetooth etc.
There’s nothing stopping Nvidia copying the existing ARM model right now. They don’t need to buy ARM to do that.
Nvidia stock price will moderate down (as will all semiconductor companies in the coming months as the chip shortages abate) and with it a more realistic valuation.
(What do I know? Been involved in a few M&A’s. ;) )
It seems surprising to assert that Nvidia would slash R&D after the acquisition, considering Nvidia’s demonstrated willingness to spend enormous amounts of money on R&D, even for speculative and risky products. For example, they funded the Project Denver/Carmel team for almost a decade, even though the resulting microarchitectures didn’t seem to have gained significant commercial traction.
If this was a sale to a PE firm I think your predictions would be more likely, but Nvidia seems really unlikely to be a “slash costs and sell it for parts” type of buyer.
You’re talking about M&A (market consolidation) and I am talking about the supply and value chain. Two completely different things.
The supply/value chain is broken up into little chunks with specialists focusing on a narrow activity eg chip design or fabrication or assembly or test etc. There are a few specialists like AD and TI that are still vertically integrated to some extent eg design and fabs, but that’s because they have specialty analog processes for things like opamps , references and so forth. However, a lot of their assembly and test is sub contracted out. For digital devices and companies like ARM, very few still run fabs (semiconductor speak for ‘fabrication plant’) - they leave that to giant fab only companies like TSMC, UMC et al. How this works is the fabs run standard processes and companies design products to be produced using those processes - so by standardising, costs are reduced. A fab process takes 2-3 yrs and a few hundred million $ to develop. Samsung and Intel still have fabs doing predominantly digital, but they have the scale and heft to afford the $1-2 billion every 7 yrs to invest in new plants. There are few others though ( mainly in memory).
You claim that it is in the interest of an ARM CPU vendor that wants to buy ARM to cut ARM's R&D and sell it for parts after buying it.
What's the rationale of this claim? (you don't say)
I'd expected that ARM CPU vendors are interested in having "great" CPUs to sell and having as big of an ecosystem as possible.
So my expectation would be that NVIDIA would significantly increas - not cut - ARM's R&D budget, and will significantly invest in the ARM platform.
On top of this, NVIDIA apparently is trying to cut its reliance on Intel and AMD CPUs. I don't see how cutting ARM's R&D budget and stripping it for parts would allow them to reach that goal.
Nvidia don’t need ARM in-house to be successful. They already are. They are overvalued and have a huge mkt cap and are looking to make an acquisition as a result. Ultimately, the stock market will decide what Nvidia does with ARM. The pressure to deliver Q on Q improvements is immense. And re slashing and burning, it happens all the time in semiconductors. When you make an M&A, the first thing you look for are cost reduction opportunities because that’s one of the P&L drivers which in turn drives stock price (supply shortages notwithstanding). As for synergies (the other big thing in an M&A) I just don’t see any. If ARM goes to Nvidia it will be a disaster for ARM. Herman Hauser, ARM’s founder (now retired) has said as much. He was very unhappy about the SoftBank deal as well.
> Nvidia don’t need ARM in-house to be successful. They already are.
You keep saying this, but this still does not match the reality that Nvidia has bid a lot of money for ARM.
So there must be something "in" for them that makes it worth it for them to pay 40 billion dollars.
The claim that this deal will be a disaster for ARM is IMO equivalent to saying that "killing ARM is worth 40 billion dollars to NVIDIA".
That makes no sense, at all. The only reason ARM is worth 40 billion dollars is because of its users. If ARM loses its user base, it is worth as much as MIPS or OpenPOWER (aka 0 dollars).
Also, if ARM loses its user base, NVIDIA ARM CPUs become worthless.
I have a hard time believing that, after investing 15 years of R&D into their own ARM CPUs and finally shipping serious ARM CPUs to market, NVIDIA would pay 40 billions to make that all worthless.
The thing I don't get about these acquisitions is, if ARM was this awesome design shop owning essentially all mobile chipsets and then some, why did they need the money? Were they going broke?
If so, then it seems like the right thing to do would be to nationalize. If not, was it just a leadership decision for purposes of expanding the company?
I was thinking more about the original sale. It's looking like it was just the board seeing dollar signs, coupled with a promise of a huge workforce expansion.
I'm no politician but that promise to double the local workforce in Cambridge definitely caught my eye as something that would play really well in that arena. Kind of like how the Foxconn plant got built in the United States.
Well, kind of got built. Foxconn got the money (in the form of major tax breaks) sure , but the promises haven't really panned out. Not that this is an atypical story of course.
Credit to Wisconsin for at least pretending to hold them somewhat accountable by cutting off the gravy train.
That’s exactly what it was - an opportunity to cash in. The other side of this coin is when you have supply shortages and/or a stock mkt run as we now have, some companies end up with huge mkt caps and are able to make purchases like this one. There is an argument that says it’s destructive in a bad way (not Schumpeter’s ‘creative destruction’) because ultimately it reduces competition and innovation.
From what I understand, the company that owns ARM (Softbank) is having financial problems,and is selling one of its successful assets to try and recover.
This thread is the first time I've ever heard of 'flogging' meaning selling something off hurriedly. The predominant way I've seen it used is to refer to administering punishment via whipping.
That is indeed the meaning of the verb "to flog". Like you would to a horse in the 17th century, to make it go faster. "Flogging off" goods to make them move faster is a relatively simple leap (and universal British slang).
Is there anything to stop SoftBank just moving the headquarters somewhere else and then selling? Or selling the IP to an overseas subsidiary, or some other way big Corps usually ignore what governments want them to do?
> Would we knowingly allow Rolls-Royce Jet Engines to be flogged off?
Not quite a flogging off, but the MiG 15 engine was a copy of the Rolls Royce Nene engine which a soviet trade delegation won in a bet on a game of billiards.
>is that these companies will simply hollow ARM out (slash R&D, cut staff etc) to pump up the target’s value, before flogging it off or breaking it up.
Given that you were a semiconductor executive in a global MNC, may I ask, How?
Now correct me if I am wrong. The whole ARM business model was built on the foundation they dont and will not / could not squeeze you out once they dominate. They are British, not acting like some Giant Tech companies you have across the pond. You also get the option to buy perpetual ARM license in various form, including ISA and Design in case you are not comfortable. i.e There is very little they could do to pump up their value. Cutting Opex doesn't do that.
The whole business model is so well designed to the point it doesn't make sense not to sell to SoftBank when they put in that ridiculously high offer. (Purely from a Financial perspective)
As with the case of TSMC, both ARM and TSMC were not supposed to be in the spotlight. They are the backend enabler of the industry. And they want their customer to get the attention and focus, while they are doing the old boring work. All of that changed when Apple jumped into the picture.
> these companies will simply hollow ARM out (slash R&D, cut staff etc) to pump up the target’s value, before flogging it off or breaking it up
This seems dramatically more likely from a generic investment consortium like SoftBank versus an actual chip-focused R&D organization like nvidia. I don't see how this is possibly a counterargument for sale to nvidia.
The UK's production capabilities are more or less irrelevant. Why not just ignore it? It's not like they're going to suddenly become some massive economic force.
I may be ignorant, but aren't ARM designed CPU's (like the A78) miles behind their most advanced licensees, like Apple with the M1/A12? Isn't most of their value just riding on licenses of their established instruction set?
They sell a lot of much cheaper and smaller cores, even if the desktop designs aren't as good. They're also working on future designs, not just riding the established ones.
A better argument would be that Nvidia gains serious power over companies who are currently ARM customer and Nvidia competitors.
Perhaps the UK want to be able to use ARM designs for domestic chips in the future, without being dependent on an American company, but yeah, then they should have objected when a Japanese company bought ARM as well.
I'm not familiar with the concrete law, but monopoly/market based rejections could probably be disputed and result in lengthy proceedings. Not so if you swing the national security hammer.
Also, as others have noted, it's quite possible that GHCQ has backdoors into ARM designs that would be jeopardized.
But despite being owned by Softbank, Arm Ltd. is still incorporated in the UK and has their headquarters there. If chip design is seen as a essential national capability, the national security argument is valid regardless, in my opinion.
Not only that, but I'd be surprised if the military didn't make heavy use of Nvidia cards for ML workloads, CAD design or god knows what. I could definitely see a way to frame this as a security threat if either company were to stop selling to them.
Perhaps more that times have changed. We used to have a strong commitment to the neoliberal ideal of a separation between state and business. The experience of nationalisation had also not been good (think Austen and BT). That’s changed and we are now in the world of “entrepreneurial states” for better or worse.
Yea it's a fascinating topic. I think as countries become weary of each other (E.U. <-> U.K., China <-> U.S., others...) they start to protect industries and such even if it goes in the face of stated ideals. I think we're seeing governments act on a more nation-state basis than in the recent past. Much more scrutiny and distrust.
Hmm. Thinking of the UK in the 1970s, "institutional competence" is not the word that springs to mind. But, yeah, there are definitely reasons why the world has got more nationalist, and if everyone else is doing it, to some extent we have to follow suit. Of course, the UK is not a continent-sized economy like the US or China, and has to be a bit more free-trade-oriented than they are.
Could you elaborate? I guess my thinking is similar to if someone wanted to try and buy Intel. The U.S. would probably stop it on national security grounds.
I hope that makes sense - at least where I was trying to go with that comment. Maybe it's incorrect or not well thought out but I'd at least like to make my point clear :)
I thought you wanted to say that they wanted to block it, but had no solid reason, so picked "easiest" route and blocked it on national security grounds
That is what I wanted to say. Apologize for any confusion. I guess I didn't understand your comment. Were you trying to say that the U.S. and Taiwan could do it so why not the U.K.? If so, yea I agree with you.
Perhaps they’ve learned from a recent US administration that “National Security” is a very broad brush, which is hard to contradict, and thus is an easy card to play when you don’t want to reveal your actual motives! [1]
That's true, but I think what the UK government is trying to do here is to get guarantees from Nvidia regarding the future of ARM operations in the UK.
If Nvidia were to relocate the brainiest parts of ARM to the US then the UK would lose a skillset that is arguably relevant for national security.
So I don't think this intervention is a definitive no to the acquisition. Rather, it appears to be a way of entering into negotiations.
It's in line with recent behavior toward e.g. Huawei and 5G. What's interesting here is that Softbank is a Japanese company, but reading the government announcement you'd think it may as well be Chinese. It would be interesting to see the UK explain to Japan, somewhat of an ally, why its company is a national security threat.
It's probably something where the government wanted to stop this deal for a number of reasons, and "national security" was the easiest justification where they already had a legal apparatus in place for doing so.
You jest, but the the world is well-aware of the risk - and possible consequences - of the top US office being compromised - or at least being held by someone who doesn't act in NATO's interests - and it's a sobering thought.
I'm not joking. Every traditional US partner suddenly realized during the Trump administration that their relation can end without warning. Now they're doing damage control.
Brexit only fully happened a few months ago, so it is hardly related to this. Any considerations w.r.t. looking 'open for business' would certainly still apply. But sure, make everything about Brexit, why not.
Brexit took close to 5 years from vote to implementation, during which there was lots of noise from all sides. The Softbank deal came after the Brexit vote, once the Sterling had dropped sufficiently (~30%) to make it additionally enticing.
It's hard not to make something about Brexit, when the government explicitly chose to make the thing about Brexit. The Softbank deal was disastrous for UK tech, and if the government really was interested in national security grounds (which is what they're claiming this time around), it would have intervened in that deal. NVIDIA isn't likely much more of a risk from a national security perspective than SoftBank. But it had to sell Brexit, and a massive foreign investment in a UK company was an opportunity for spin too enticing to give up.
The full legal consequences of brexit have still not fully come into force yet (there are various grace periods still to elapse: the most recent was the start of this month and there is still another extended to 1st October). And the secondary effects will likely take years to become apparent.
The only thing it currently means is that the CMA will investigate and prepare a report.
On the face of it the difference with Softbank is that Nvidia is a big semiconductors player and thus that this acquisition can have a material impact on competition in the industry and the UK, which was not the case with Softbank.
In addition, since the UK is now "properly independent" the government is probably keen to show it by doing what the US and EU competition regulators do.
How are there security reasons when their foreign licencees already get complete and modifiable designs? It's only an IP protection at that point enforceable through friendly relations, not anything immune to adversaries. I can see all the anti-competitive concerns though.
But what are the consequences exactly? The deal will be stopped and ARM still belongs to a foreign company. Why not follow this to its logical conclusion and nationalize ARM if it is so important?
You can't prevent someone to sell something if it doesn't want to keep it.
I guess governments are suddenly much more interested in keeping key industries on-shore.
I believe HMG didn't do anything to stop Astra-Zeneca being sold out of the UK a few years ago, and it's just luck it didn't go through. They probably see the need now.
> Under the powers set out in the Enterprise Act 2002, the Secretary of State for Digital, Culture, Media and Sport is able to intervene on national security grounds.
> The Competition and Markets Authority (CMA) will prepare a report on the competition and national security aspects of the proposed transaction.
So it's being framed as a national security threat, interesting.
This is actually a fairly common way to justify protectionist and interventionist policy. It's "think of the children" in a new disguise, really.
But such is policy making. You have to justify your policy with what is popular, not with the truth. For example: lax covid restrictions justified because we can't be sure it'll work, vs. because we know that it'll hurt the economy.
I agree with your view on political rhetoric, however, that doesn't mean these things aren't issues of national security.
Having access to the fastest chips is a matter of national security, at least for the US. The AI race (even if it's just faster NN processing) has massive implications for modern warfare and national security.
And in the case of issues that could touch on foreign trade or investment treaties, you may have to justify your policy using certain exceptions such as "national security".
Makes sense. I think it's going to be a lot more difficult for Nvidia to argue against this, rather than if the intervention had been about competition or something.
"In the UK, there are 13 national infrastructure sectors: Chemicals, Civil Nuclear, Communications, Defence, Emergency Services, Energy, Finance, Food, Government, Health, Space, Transport and Water. Several sectors have defined ‘sub-sectors’; Emergency Services for example can be split into Police, Ambulance, Fire Services and Coast Guard.
...the loss or compromise of which could result in:
a) Major detrimental impact on the availability, integrity or delivery of essential services – including those services whose integrity, if compromised, could result in significant loss of life or casualties – taking into account significant economic or social impacts; and/or
b) Significant impact on national security, national defence, or the functioning of the state.’
"""
It'll be interesting to see how they can justify Nvidia's ownership of ARM a security threat, whilst ARM being owned by a Japanese investment bank being _just fine_. What's the difference?
Its obvious, firstly the bank is not going to mess with chips designs and block off customers the way Nvidua might becauae to it, they are conpetitirs.
Secondly, Nvidia will probably restructure / absorb ARM. At the moment its corporate structure is mostly intact
An interesting side aspect, assuming this is final:
Before the Arm acquisition materialized, Nvidia was quite present in the RISC-V space. All current Nvidia cards have at least one RISC-V chip on it.
So while their intended high performance use cases are not feasible yet, this could lead to Nvidia focusing on RISC-V again the medium term, which would definitely be beneficial.
Of course Nvidia can still pursue ARM based designs without owning the company.
I don't think it's a matter of one or the other but rather using different ISAs for different things. All the RISC-V use by NVidia seems to have been in microcontrollers and all the recent ARM use has been in application cores.
This objection should have been raised for the original sale. However, the owners then made bank on that sale and those owners also presumably had better political leverage then. Read that as Brits sell crown jewels for coin to foreigners. Foreigners re-sell crown jewels but UK discovers public interest and raises objection to crown jewels being sold. It's a bit late.
Can anyone more knowledge than me on these matters explain what this means as far as what the UK can and might do? Also, what has the UK done historically when it has invoked powers set out by this Act?
It appears that at the moment all this means is there will be an investigation and a report. Presumably, any action taken to block the sale will have to wait until after that.
Well someone woke up while sleeping at the wheel. My concern is that The Competition and Markets Authority (CMA) has no real business to be evaluating national security issues.
There's a forecast question on Foretell (a crowd forecasting site run by a think tank at Georgetown) about the likelihood of a successful acquisition if anyone is interested. Current crowd consensus is 41% likelihood, down 2% in the last day: https://www.cset-foretell.com/questions/102-will-nvidia-acqu...
“On national security grounds”...? Why would NVidia, a US corp, be more of a security problem than a Japanese one? If it’s just a matter of commercial overreliance on a single supplier, I find the “National security” bit to be somewhat specious.
Because the nature of this acquisition is completely different. SoftBank left Arm mostly alone; i.e. brand survived, all offices survived, etc. If this deal goes through, Arm will get fully integrated into Nvidia. There won't be an "Arm" anymore.
But the British government has experience, from the Kraft purchase of Cadbury, that even if the buyers promise to keep jobs in the UK and product quality high, once the deal goes through they can renege on those promises instantly with no negative consequences.
I reckon all Western countries have gone through some sort of experience of this. Corporations will do the deal, reap the rewards, and next week or next year they’ll just do as they please - because the concept of honour is too human to be expected of an artificial construct.
Have you seen the foreign policies of Japan vs. the US? Japan is entirely more reliable than the US where the foreign policies can change at a whim every four years.
See my other comment. Because Arm might be working with GCHQ and Arm / Nvidia might stop that and work with NSA - unlikely to be an issue when Softbank owned.
I think when country allows sale of any company that owns vital technology / IP / etc it plays to a detriment of their own citizens for the sake of filling owner's pockets. So good for UK for trying to protect it disregarding true motives.
The semiconductor supply chain is now almost completely disaggregated ie everyone specialises in just a small part of the value chain. ARM’s speciality is in CPU design and it has carved out for itself the enviable position of being the defacto standard for mobile applications - almost every single phone on the planet has ARM processor(s) running it. And their products are in dozens of other end applications segments as well. These chips are embedded in System on Chip IC’s and manufactured by third party companies like TSMC and UMC etc to end customer specifications, like Apple or Samsung for example.
The problem with the original SoftBank deal, and now the Nvidia deal, is that these companies will simply hollow ARM out (slash R&D, cut staff etc) to pump up the target’s value, before flogging it off or breaking it up. The stock market doesn’t value synergies, although it is quite happy to punt this aspect when M&A deals are in the offing. Given its strategic position as the defacto standard for mobile comms, that’s a serious threat.
ARM also gives the UK strategic leverage in any trade negotiations. Would we knowingly allow Rolls-Royce Jet Engines to be flogged off? No. Ditto ARM.
So, I think this is the right policy and hopefully the government will see fit to step into other deals like this and block them.
I’ve been through a PE acquisition. We were stripped bare and bits sold off before finally getting our mojo back. I benefited handsomely but we were not the company we were before and the job losses in the process were huge. It will be no different with Nvidia’s proposed take over of ARM.
(disclaimer: I was a semiconductor executive in a global MNC).
To me this seems to be a reaction to the announcement of nvidia to build a one-in-all HPC system. Nvidia already owns Mellanox for the Infiniband Network and their GPUs are the fastest on the market. Now with an additional CPU in their portfolio they could provide a complete Supercomputer in one piece. Think about a HPC-SOC. Supercomputers are still a matter of national security.
FTA: With the help of tight coupling between NVIDIA CPUs and GPUs, Alps is expected to train GPT-3, the world’s largest natural language processing model, in mere two days.
Seems a bit like closing the stable door after the horse has bolted. This should have happened when Softbank came around.
'National security grounds' is interesting. It could simply be that the UK is no longer part of the EU and this is belatedly considered a strategic national asset (i.e. a foot in the game of chip design), vs. GCHQ and ARM working together somehow.
I can see a future where Nvidia buys ARM, becomes more hostile to licensees, and the door is left open for something like RISC-V to gain more market relevance.
I've been struggling to understand why Nvidia's takeover of Arm might be a UK national security issue (the competition case is quite clear but separate).
I'm guessing though that Arm collaborates with UK intelligence agencies and that that collaboration might be jeopardised with the Nvidia takeover (in a way that it was not with the Softbank takeover). Does anyone have any further insights?
I think it's a national capability to do things move - probably sharpened by the realization (in the middle of the pandemic) that not everyone was a friend of the UK and would quite happily watch us drown while sitting round singing songs about how many lifebelts they had.
I think that the capability to design a modern CPU is pretty essential for future defence independence. I think that ARM represents a good chunk of the UKs claim to be able to do that. If the UK wants a share of future US programs of all sorts then it needs to be able to make these claims - or face must less generous terms.
What's the point of being able to design CPUs if we can't make them? We certainly don't have defence independence at all.
I'm not sure about the second point but it seems premised on withholding IP from US which seems unlikely.
Much more likely that there is intense collaboration between say GCHQ and Arm (maybe both ways -> GCHQ gets to understand modern CPU security issues from Arm and Arm benefits from GCHQ input on threats). If that relationship swaps to NSA then there would be real damage to UK security apparatus.
We get our panties in a bunch (and I do too) about the real high end fabs for CPUs, but push-come-to-shove there _are_ fabs in the UK.
Infineon (German owned) and Nexperia (Dutch owned) both own fabrication plants in the UK, so it's possible to scale that up if we were at war, the knowledge is here.
> What's the point of being able to design CPUs if we can't make them? We certainly don't have defence independence at all.
If you needed them for defence I'm sure you could set up a fab on older process nodes fairly fast. A tank consumes and generates so much power for moving that it doesn't matter if the CPUs in it will last only 2 hours in a cell phone...
Being dependent on the US turns out to be not a great strategic scenario in this decade.
(Speaking as a Canadian who has watched 30 years of continental economic integration and heard lots of friendly talk since the campaign for the 1988 Free Trade Agreement but now back of the line waiting for vaccines imported from Europe because the US won't export to us and our domestic manufacturing was sold off decades ago because of said continental integration.)
Also the US itself has used the "national security" excuse for trade issues multiple times over the last few years where it was seemingly not the case (steel & aluminum trade disputes, etc). So the precedent has been set. And there's little sign of Biden really doing much to reverse that.
National defense so we can defend ourselves from opponents that the US created, or act as an imperial arm for American interests?
Seem to recall some very agitated US commentators bashing Canada when we chose not to enter the second war in Iraq. How's that working out for you, BTW?
ARM is a piece of infrastructure now, and dangerous in the hands of NVidia for other reasons than spying. Mostly economical. And yes, that's also national security.
From now on, every ARM processor costs $40 per chip to license. Except, of course, those made by NVidia.
or
From now on, all improvements to the reference ARM architecture will only be available in NVidia chips for the first two years. Afterwards they'll be available for licensing at the current costs.
Those are monopoly issues. And now a national security issue:
From now on, $RANDOM_EUROPEAN_COUNTRY is under embargo wrt to US intellectual property. NVidia being an US company, that includes ARM reference designs. Basically what happened to Huawei with the OS, except now it includes the CPUs too.
Which is why there are distinct competition investigations going on in UK, EU and elsewhere.
I think you're overdoing the last point: there is lots of key technology licensed from US firms and no-one in the UK thinks that this is a major national security issue.
Much more likely that there is a specific issue that UK government has identified that poses a realistic problem for UK security services.
The current silicon chip shortage is showing just how dependent we are on chips, and while Arm doesn't have their own fabs, they are an important part of that ecosystem. There's a good chance that the current drought may play a role in US decisions on dealing with the China/Taiwan issue, if China shows aggression there is now a clear national security incentive for the US (and other countries, for that matter) to intervene and protect Taiwan, just like they did with oil for the last 40 years.
given that, it's entirely reasonable that the UK doesn't want ARM gutted and the IP shipped out of the country.
> 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.
Any one of these 4 regulators can still stop the sale.
I'm confused why China get a say? ARM is UK, Softbank is Japan and Nvidia is US, why do the Chinese have a claim? Is it just because no one wants to upset them?
Not necessarily. From reading the piece I understand that the net effect here is to invoke an investigation by the Competition and Markets Authority (ie to ensure there is sufficient competition in the market, it does not necessarily need to be by UK owned entities)
Public-traded companies are independent, so no merger or consolidation applies. Here is what the U.K. regulatory body defines a 'relevant merger' (regardless if U.K. or internationally-based):
the creation of a relevant merger situation as defined in section 23 of the Enterprise Act 2002 (“the Act”), in that:
(a) two or more enterprises will cease to be distinct;
(b) in the course of the enterprises ceasing to be distinct, a person or group of persons will bring a relevant enterprise (as defined in section 23A of the Act) under their ownership or control; and
(c) the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £1 million.
Surely that horse bolted when they sold to Softbank. I suspect they will try to argue that it has to be someone “outside the US” or otherwise protected from monopolistic actors.
No. It just means Nvidia need to give some kickbacks to the fantastically corrupt ruling party.
Really hard to see this as anything other than a shakedown attempt by people who don’t understand that you can’t keep an ip licensing company inside national borders for long.
Because even if it was successful from a national security standpoint (semicon independence) it would look like a total boondoggle. It would cost billions of government money, and then overrun those billions in cost. Chips would still be slower than their competitors, and the new British fabbed chips would be even slower. No matter which party pulled the trigger, the other would ruthlessly tear the project down in the eyes of the public as corrupt and expensive, terrible for the environment, huge water and land usage, etc.
I'm not trying to say that ARM is incompetent, but it takes years for an institution to learn how to do this. ARM doesn't currently operate fabs.
It would be a separate effort from ARM itself, merely complimentary. It wouldn't have to be too expensive either, if it avoided private profit-seeking suppliers and instead attempted to vertically integrate by nationalising related industries.
You're correct that neither main party would do this, partly because of the inadequacies of the liberal election cycle. Only direct worker democracy could reliably centrally plan for use rather than profit.
I don't know near enough about Nvidia or ARM as organizations to justify why I don't like this purchase. I just see two big names being consolidated yet again and I don't like it. Even when the buyer isn't directly competing with the organization they're acquiring, they could be.
Is it possible that Apple is calling their chips Apple Silicon for reasons other than marketing? Since Apple now plans to design and manufacture chips for all their products it’s also possible Apple comes up with an ARM compatible instruction set rather than ARM instruction set to avoid any issues with ARM being part of such takeovers. Just a wild theory since no one has yet (probably legal reasons) done a deep dive into the M1 processor.
There can be no such thing as an ARM compatible instruction set that is not an ARM instruction set. Either it supports the necessary instructions then it is an ARM instruction (possibly super)set or it doesn't then it's incompatible.
I would say no if only because it's easier to find talent that understands ARM than it is to teach talent about the nuances of your own single-platform instruction set.
I think that argument would apply in a lot of places but most likely it wouldn't apply in Apple that are famous for their "not invented here" attitude across the company.
- EU drops plans to license ARM and start to obviously fail to buid their own arch
- Softbank announces it want to get rid of ARM
- Nvidia want, UK agree
- Apple announces M1
- Nvidia announces Grace
- LG drop making phones
- China announces cpu independence
- UK oh noes, our treasure ! - suddenly "own" arch is good ? LOL
If it is just money for Nvidia deal need to be preserved.
But Apple and Nvidia are Intel killers now and noone saw potential in ARM ? More likely ARM wanted to ditch UK. Or rather top managers was talking with US buyers earlier... Like Altavista execs moved to Google after headshotting own company.
Anyway, whatever - let just x86 die. And pleas, pleas kill MS Windows too !! There is astonishing amount of money behind this madness. Not to mention "spyware" element in both.
The problem with the original SoftBank deal, and now the Nvidia deal, is that these companies will simply hollow ARM out (slash R&D, cut staff etc) to pump up the target’s value, before flogging it off or breaking it up. The stock market doesn’t value synergies, although it is quite happy to punt this aspect when M&A deals are in the offing. Given its strategic position as the defacto standard for mobile comms, that’s a serious threat.
ARM also gives the UK strategic leverage in any trade negotiations. Would we knowingly allow Rolls-Royce Jet Engines to be flogged off? No. Ditto ARM.
So, I think this is the right policy and hopefully the government will see fit to step into other deals like this and block them.
I’ve been through a PE acquisition. We were stripped bare and bits sold off before finally getting our mojo back. I benefited handsomely but we were not the company we were before and the job losses in the process were huge. It will be no different with Nvidia’s proposed take over of ARM.
(disclaimer: I was a semiconductor executive in a global MNC).