Developers
September 16, 2020

Nvidia In Talks to Buy Arm: Why the Deal Could Be a Catastrophe

SoftBank’s decision to sell Arm Holdings could have catastrophic repercussions for the industry.

In the world of chipmakers, Arm Holdings is unique. Its ARM chips are used by companies around the world, it powers iPhones, iPads and very soon Macs, and it is trouncing Intel on many fronts.

In spite of its success, its impending sale could have far-reaching consequences for the industry and threaten the very factors that have led to Arm’s success.

Arm’s Business Model

Arm Holdings was originally founded by Apple, Acorn Computers and VLSI Technology. Eventually, under CEO John Scully, Apple sold its stake in Arm. The company continued developing its mobile chips, eventually being bought out by SoftBank in 2016.

Other major players in the semiconductor industry—such as Intel, AMD and Nvidia—manufacture the chips they sell, giving them direct control of the product.

Arm, on the other hand, licenses their intellectual property (IP) and chip designs. The company has several different levels of licenses, giving licensees different levels of control and customization. The broadest license, the Architectural License, gives holders the ability to heavily customize Arm’s designs. A number of companies hold this license, including Apple, Qualcomm, Applied Micro, Samsung and Nvidia.

Apple is a classic example of what licensees can do with Arm’s designs. While Apple’s chips are loosely based on Arm’s IP, because Apple’s license allows it to customize the design however it sees fit, it is able to essentially create its own custom silicon. Thanks to Apple’s years of experience designing chips, the company’s iPads and iPhones lead the industry in performance. As a result, Apple is migrating its Mac computers to its own chips as well.

This is what makes Arm unique in the industry. Countless companies, many of whom are direct competitors, all license Arm’s designs and use them as they see fit. Dr. Hermann Hauser, one of Arm’s cofounders, touted this as a critical component to Arm’s success.

”It's one of the fundamental assumptions of the ARM business model that it can sell to everybody," he told the BBC.

”The one saving grace about Softbank was that it wasn't a chip company, and retained ARM's neutrality.”

Up For Sale: How An Nvidia Purchase Could Change Everything

For many, it’s hard to understand why SoftBank is looking to sell Arm. After all, Arm chips are being used throughout the mobile world. While it may not seem like a major factor, in the scheme of the entire computer industry, Apple’s move to chips based on Arm’s designs will likely help start a fundamental shift in the larger computer industry in general.

Steven Sinofsky, who formerly served as Microsoft’s Windows Division President, highlighted how the dominoes will likely fall once Apple moves to ARM-based chips.

Software developer Steve Troughton-Smith, made the following observation on Twitter:

I really hope the ARM transition is what gets Apple's Mac lineup to 120Hz, Face ID & touch. There are so many things we take for granted on iOS that make macOS feel broken without them, and with the convergence of the software and hardware it feels like those are closer than ever

In reply, Sinofsky outlined what he thinks will happen:

It will. Guaranteed.

In two years there is only ARM hardware and in 4 Intel will be ancient memory. The ecosystem will have rolled over. And Mac will be the ultimate developer PC. iPad will be used for more and more “work”.

PS yes a computer without touch is broken.

With this much existing and potential momentum behind Arm, it seems strange that SoftBank is willing to sell the company, especially after spending some $32 billion to purchase it. Ultimately, the issue stems from missteps SoftBank has made across its business, as it is heavily invested in many other companies, such as Uber, Slack and WeWork. With some of its other investments failing, SoftBank is looking to recoup some of its money.

Why Nvidia May Be a Bad Fit

Dr. Hauser makes the case that Nvidia is a bad fit for Arm, specifically because Nvidia is already a semiconductor manufacturer. As a result, Dr. Houser fears that Nvidia could be trying to buy Arm to squeeze out other companies that rely on its chips.

“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 said, according to the NS Tech.

As NS Tech points out, since Nvidia already has an Arm license, buying the company doesn’t give it anything it doesn’t already have—unless it’s primary goal is to gain a competitive advantage and prevent other companies from being able to compete as easily in the semiconductor industry.

This makes sense when considering how much Nvidia has evolved as a company. Originally, Nvidia primarily made GPUs for gaming. Over the years, however, it has increasingly branched out, with its chips being used for a wide range of applications.

Suddenly owning the largest mobile semiconductor company could put Nvidia in a position to head off any potential rivals that might be using Arm’s IP as the basis for their chips. This could result in the entire industry scrambling to come up with alternative chipsets. Given Arm’s dominant position, it would likely take years before the industry could effectively compete, giving Nvidia even more of an advantage.

Unfortunately, it appears as if the deal with Nvidia is likely to go through. Only time will tell if the concerns are well-founded or baseless.

TagsNvidiaArm
Matt Milano
Technical Writer
Matt is a tech journalist and writer with a background in web and software development.

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DevelopersSeptember 16, 2020
Nvidia In Talks to Buy Arm: Why the Deal Could Be a Catastrophe
SoftBank’s decision to sell Arm Holdings could have catastrophic repercussions for the industry.

In the world of chipmakers, Arm Holdings is unique. Its ARM chips are used by companies around the world, it powers iPhones, iPads and very soon Macs, and it is trouncing Intel on many fronts.

In spite of its success, its impending sale could have far-reaching consequences for the industry and threaten the very factors that have led to Arm’s success.

Arm’s Business Model

Arm Holdings was originally founded by Apple, Acorn Computers and VLSI Technology. Eventually, under CEO John Scully, Apple sold its stake in Arm. The company continued developing its mobile chips, eventually being bought out by SoftBank in 2016.

Other major players in the semiconductor industry—such as Intel, AMD and Nvidia—manufacture the chips they sell, giving them direct control of the product.

Arm, on the other hand, licenses their intellectual property (IP) and chip designs. The company has several different levels of licenses, giving licensees different levels of control and customization. The broadest license, the Architectural License, gives holders the ability to heavily customize Arm’s designs. A number of companies hold this license, including Apple, Qualcomm, Applied Micro, Samsung and Nvidia.

Apple is a classic example of what licensees can do with Arm’s designs. While Apple’s chips are loosely based on Arm’s IP, because Apple’s license allows it to customize the design however it sees fit, it is able to essentially create its own custom silicon. Thanks to Apple’s years of experience designing chips, the company’s iPads and iPhones lead the industry in performance. As a result, Apple is migrating its Mac computers to its own chips as well.

This is what makes Arm unique in the industry. Countless companies, many of whom are direct competitors, all license Arm’s designs and use them as they see fit. Dr. Hermann Hauser, one of Arm’s cofounders, touted this as a critical component to Arm’s success.

”It's one of the fundamental assumptions of the ARM business model that it can sell to everybody," he told the BBC.

”The one saving grace about Softbank was that it wasn't a chip company, and retained ARM's neutrality.”

Up For Sale: How An Nvidia Purchase Could Change Everything

For many, it’s hard to understand why SoftBank is looking to sell Arm. After all, Arm chips are being used throughout the mobile world. While it may not seem like a major factor, in the scheme of the entire computer industry, Apple’s move to chips based on Arm’s designs will likely help start a fundamental shift in the larger computer industry in general.

Steven Sinofsky, who formerly served as Microsoft’s Windows Division President, highlighted how the dominoes will likely fall once Apple moves to ARM-based chips.

Software developer Steve Troughton-Smith, made the following observation on Twitter:

I really hope the ARM transition is what gets Apple's Mac lineup to 120Hz, Face ID & touch. There are so many things we take for granted on iOS that make macOS feel broken without them, and with the convergence of the software and hardware it feels like those are closer than ever

In reply, Sinofsky outlined what he thinks will happen:

It will. Guaranteed.

In two years there is only ARM hardware and in 4 Intel will be ancient memory. The ecosystem will have rolled over. And Mac will be the ultimate developer PC. iPad will be used for more and more “work”.

PS yes a computer without touch is broken.

With this much existing and potential momentum behind Arm, it seems strange that SoftBank is willing to sell the company, especially after spending some $32 billion to purchase it. Ultimately, the issue stems from missteps SoftBank has made across its business, as it is heavily invested in many other companies, such as Uber, Slack and WeWork. With some of its other investments failing, SoftBank is looking to recoup some of its money.

Why Nvidia May Be a Bad Fit

Dr. Hauser makes the case that Nvidia is a bad fit for Arm, specifically because Nvidia is already a semiconductor manufacturer. As a result, Dr. Houser fears that Nvidia could be trying to buy Arm to squeeze out other companies that rely on its chips.

“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 said, according to the NS Tech.

As NS Tech points out, since Nvidia already has an Arm license, buying the company doesn’t give it anything it doesn’t already have—unless it’s primary goal is to gain a competitive advantage and prevent other companies from being able to compete as easily in the semiconductor industry.

This makes sense when considering how much Nvidia has evolved as a company. Originally, Nvidia primarily made GPUs for gaming. Over the years, however, it has increasingly branched out, with its chips being used for a wide range of applications.

Suddenly owning the largest mobile semiconductor company could put Nvidia in a position to head off any potential rivals that might be using Arm’s IP as the basis for their chips. This could result in the entire industry scrambling to come up with alternative chipsets. Given Arm’s dominant position, it would likely take years before the industry could effectively compete, giving Nvidia even more of an advantage.

Unfortunately, it appears as if the deal with Nvidia is likely to go through. Only time will tell if the concerns are well-founded or baseless.

Nvidia
Arm
About the author
Matt Milano -Technical Writer
Matt is a tech journalist and writer with a background in web and software development.

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