Nvidia to acquire SoftBank’s chip designer Arm for $40 billion

On Monday, in a statement Japan’s SoftBank Group Corp said, Nvidia Corp has agreed to acquire its chip designer Arm for $40 billion in a deal that is potent enough to reshape the global semiconductor industry.

The acquisition places a vital supplier of Apple Inc and others under the control of a single player. The deal could potentially face a backlash from regulators.

For Softbank, the divestment represents an early from the chip making industry; only four years it had acquired the technology group for $32 billion. For SoftBank the sale is designed to raise cash. It comes at a time when SoftBank executives, struggling to improve the group’s share performance, have held early talks of taking the group private, said a source. Such talks could gain weightage and momentum following the Arm sale.

With the news reaching the market, SoftBank’s shares surged by 10% in Tokyo.

The deal sees Nvidia paying $21.5 billion in shares and $12 billion in cash, including $2 billion on signing to SoftBank. The deal also sees SoftBank and its $100 billion Vision Fund, which has a 25% stake in Arm, take a stake in Nvidia in the range of 6.7% to 8.1%.

In a statement, Nvidia CEO Jensen Huang said, the deal will boost the company’s data center chips, and he sees it as “pro competition”. It also marked “the first time in history the industry could see something that is genuinely alternative” to Intel Corp’s domination of the sector, added Huang.

However, with the deal facing potential push backs, Taiwan-born Huang emphasized that he will retain Arm’s neutral licensing model and expand it by licensing out Nvidia intellectual property for the first time.

In a statement Nvidia said, it will license its flagship graphical processor unit through Arm’s network of silicon partners. The company makes chips for a host of devices, including self-driving cars; it also makes its technology available for others.

Both companies had not taken the British government into confidence and did so shortly before the announcement since the talks were secret, said Huang.

“Cambridge is going to be a site of growth,” said Huang regarding the artificial intelligence research center which the company aims to build at Arm’s headquarters in Cambridge.

The deal takes on a different turn since “Arm will not become subject to U.S. export controls under the deal,” said Huang.

This gains significance since the deal is subject to regulatory approvals frin countries including the United States, Britain and China. Thousands of Chinese company use Arm chips.

In what would be a direct challenge to rivals, Huang said it is “possible” that Nvidia will build its own Arm-based server chips.

The Arm deal is expected to close by March 2022.

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