NVIDIA's Arm Acquisition 'An Absolute Disaster' – Co-Founder

NVIDIA’s Arm acquisition is ‘an absolute disaster’ for both the chip design firm’s home country and Europe, Arm co-founder believes. Speaking to BBC Radio 4 following the blockbuster merger announcement, Hermann Hauser reiterated his disapproval of the move. The industry veteran has been critical of the tie-up for a while now, even before it became official this Monday. Selling the last globally relevant company on the Old Continent is an extremely short-sighted move, Hauser argued.

While recent months were abundant with speculation, NVIDIA and Arm parent SoftBank still negotiated the deal quite rapidly. In principle, the Japanese conglomerate agreed to a bid valued at $40 billion. The offer is a mix of cash and NVIDIA stock, though the actual ratios are still being negotiated.

In a regular year, SoftBank would prefer cash. In the middle of 2020, however, securities of a global technology juggernaut sound like a better deal. In other words: a more predictable one. Another way to look at this is that NVIDIA will likely outperform the U.S. economy in the medium term. Ergo, its stock will be worth more than its cash equivalent is today.

Expecting China to bless NVIDIA’s Arm acquisition may be naive

Of course, neither one of the involved parties should be counting their chip patents just yet. Because the Arm co-founder is hardly the only prominent critic of NVIDIA’s Arm acquisition. The UK government, for one, stands little to gain and everything to lose from the tie-up. Especially in the wider context of its current geopolitical situation. Then again, cynics might say the very fact that Brexit is happening proves London is inept enough to approve this acquisition.

That’s without even beginning to account for the antitrust implications of the deal. Because buying Arm would give NVIDIA over 90% of the smartphone chip market and a similar share of the embedded IoT silicon one. Courtesy of Arm’s affordable licensing model that standardized its architectural designs in virtually every electronics niche bar traditional computers. Hauser also argues NVIDIA would inevitably dismantle Arm’s business model on which so many of its direct rivals depend on.

Just to illustrate what an Arm-ed NVIDIA could do to its competitors… well, no need to speak in hypotheticals, just look at how effectively the U.S. crippled Huawei. Primarily due to the complex nature of modern chip architecture licensing. The other Arm co-founder, Tudor Brown, repeatedly voiced agreement with Hauser’s prognosis in the past. At last, between Huawei and antitrust concerns, it may be naive to expect China to approve this deal. In fact, it’s hard to imagine what the U.S.-based NVIDIA could do to win Beijing’s blessing at all.

NVIDIA, for its part, argues that taking Arm off SoftBank’s hands after only four years would create the ultimate AI company of the future. I.e. one that promises to benefit everyone – at least until it gets its way with antitrust regulators.