Nvidia No Longer Buying Chip-Design Specialist Arm in Mega Deal Gone Awry

The sale between SoftBank Group and Nvidia, the largest chip deal in history, is no longer in the works.

In a joint statement, the companies said the slated acquisition was rocked by “significant regulatory challenges.”

U.S. graphics chip giant Nvidia planned to buy British processor designer Arm from SoftBank in an acquisition projected to be worth $66 billion. The companies announced the takeover in September 2020. However, critics early on said it would be a “disaster” if Nvidia bought the company.

Creating a Monopoly

Hermann Hauser was an entrepreneur instrumental to the development of the first Arm processor, CNBC reported. He said the new deal would create a monopoly and that Nvidia would “destroy” Arm’s business model. Nvidia licenses chip designs to approximately 500 companies and some of those compete directly with the firm, Hauser said.

Arm’s chips power most of the world’s smartphones, as well as other devices.

Channel Futures reported last year that the acquisition was unlikely to win regulatory approval.

Nvidia’s Jensen Huang

In June, Jensen Huang, Nvidia’s founder and CEO, signaled that he anticipated the deal would face regulatory scrutiny. Huang said the Nvidia-Arm transaction would benefit customers.

“The benefits to customers will be more and better IP, more accelerated road maps and hopefully taking Arm from the cloud to the edge to IoT and HPC — everything,” Huang said. “The breadth of computing today is gigantic.”

The FTC

However, the U.S. Federal Trade Commission had other plans, and in December sued to block the acquisition.

Holly Vedova is director of the FTC’s Bureau of Competition.

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” said Vedova. “This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals. The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”

GlobalData’s Lil Read

Lil Read is an analyst in the thematic research team at GlobalData. She said Nvidia made the right decision to walk away from Arm.

“The deal didn’t have a leg to stand on in the face of regulatory scrutiny from all corners of the globe,” Read said. “Softbank now needs to think of Arm’s future. An initial public offering (IPO) looks likely – the U.K. government would surely like to see the home-grown chip designer float in London, and potential IPO reforms could create the perfect environment for this. Otherwise, Arm may be ripe for a takeover by a private equity consortium backed by chip-friendly giants such as Apple, Qualcomm, and TSMC – Arm’s largest customers.”

SoftBank plans to pursue a public listing for Arm, aiming to launch the IPO before the end of the next fiscal year.