One of Britain’s most successful tech companies, Arm Holdings, is being sold by its Japanese owners for $40bn in a deal that could reshape the semiconductor landscape.
Nvidia, a US company, will pay SoftBank $21.5bn in shares and $12bn in cash for the chip designer although the deal is still subject to regulatory approval in the UK.
It is expected that Nvidia will face tough conditions on protecting jobs and the status of Arm’s headquarters in Cambridge as part of the deal.
SoftBank paid $32bn for the company four years ago in a deal that netted a fortune for Arm’s executives.
Founded in Cambridge in 1990, Arm specialises in microprocessors, and dominates the global smartphone market. But its chips are also found in countless sensors, smart devices and cloud services.
Nvidia, based in California, is best known for graphics cards that are favoured in the video game industry. It has seen sales skyrocket during the coronavirus crisis, with gaming a popular past-time in lockdown.
Its products are also increasingly used for artificial intelligence and in data centres.
Softbank’s boss, Masayoshi Son, has lionised the potential of Arm but is slashing his stakes in major assets to raise cash.
The deal will see SoftBank and the $100bn Vision Fund, which has a 25% stake in Arm, take a stake in Nvidia of between 6.7% and 8.1%.
SoftBank could also be paid an additional $5bn in cash or shares depending on the chip designer’s business performance, with Arm employees to be paid $1.5bn in Nvidia shares.
With potential pushback looming, Nvidia chief executive Jensen Huang emphasised he will retain Arm’s neutral licensing model and expand it by licensing out Nvidia intellectual property for the first time.
The companies did not discuss the deal with the British government until shortly before the announcement because the talks were secret, Huang said. A new artificial intelligence research centre will be built at Arm’s Cambridge headquarters.
“Cambridge is going to be a site of growth,” Huang said.
Nvidia began as a graphics chip designer and has expanded into products for areas including artificial intelligence and data centres.
The Arm acquisition will put Nvidia into even more intense competition with rivals in the data centre chip market such as Intel and Advanced Micro Devices because Arm has been developing technology to compete with their chips.
It gives Nvidia control of technology from Arm that could be used to make its own central processor chips, doubling down on Nvidia’s strategy of buying up technologies in parts of the booming data centre business where it does not currently play.
Arm does not make chips but instead has created an instruction set architecture – the most fundamental intellectual property that underpins computing chips – on which it bases designs for computing cores.
Arm licenses its chip designs and technology to companies like Qualcomm, Apple and Samsung, which in turn use the technology in their chips for smartphones and other devices.
Apple’s forthcoming Mac computers will use Arm-based chips.