UK tech company ARM Holdings sold to Nvidia in $40bn deal

One of Britain's most successful tech companies and chip manufacturers, ARM Holdings, has been let go by its Japanese owners and sold to US computing manufacturer Nvidia at a $40 billion (€33 billion) asking price.

Nvidia, who specialise in computing hardware, will pay previous owners SoftBank $21 billion (€17.7 billion) in shares and $12 billion (€10.1billion) in cash, although the deal is subject to regulatory approval in the UK and could face opposition from its new opponent's rivals.

SoftBank acquired ARM for £32 billion (€34.6 billion) back in 2016 as a part of "The Internet of Things," an idea that wireless connectivity among everyday items such as refrigerators, cars and other devices would lead to useful new scenarios. 

It is expected that Nvidia will face stern pressure to both protect jobs and to protect the status of ARM's headquarters in Cambridge as criteria for the deal.

ARM's co-founder Hermann Hauser described the takeover as an "absolute disaster" and fears the transaction could destroy their business model and cause them to suffer extreme job losses at their headquarters as well as various satellite firms across the UK.

Speaking on BBC Radio 4 on Monday morning, he admitted that any promises were "meaningless unless they are legally binding," pointing to the takeover of Cadbury's by Kraft in 2010.

Founded in 1990, ARM specialises in microprocessors and currently dominates the UK smartphone market, but its chips are found in various products, from sensors to cloud services.

Nvidia meanwhile is probably most famous for their design of ultra-powerful graphics cards specifically designed for the gaming industry. In recent years, their products have also been used in artificial intelligence and data centres.

Jensen Huang, Nvidia’s chief executive, said: "The deal [would] create the premier computing company for the age of artificial intelligence."

“AI is the most powerful technology force of our time and has launched a new wave of computing. In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI.

“ARM will remain headquartered in Cambridge. We will expand on this great site and build a world-class AI research facility, supporting developments in healthcare, life sciences, robotics, self-driving cars and other fields. And, to attract researchers and scientists from the UK and around the world to conduct groundbreaking work, Nvidia will build a state-of-the-art AI supercomputer, powered by ARM CPUs. ARM Cambridge will be a world-class technology centre.”

The acquisition is unlikely to go unchallenged. ARM is known to provide technology to whoever is willing to pay, with customers including Apple and Samsung, which, in turn, use their chips in their devices.

Nvidia could use ARM to create their own central processor chips, a part of a tactic Nvidia are known for in buying into sectors in which they do not currently operate.

The deal comes as SoftBank's finances have begun to deteriorate over the year, after faulty investments in companies such as WeWork and Uber. More recently, the company's shares had gone down after placing some large stakes in tech giants.

Meanwhile, Nvidia is currently going through a boom period thanks in part to an increase in videogame investments throughout the pandemic. Nvidia is due to launch a new generation of graphics cards this week and the company predict a 46% growth in revenue for the third quarter.

The deal would also put ARM under the control of an American company as trading between the US and China has hit a stalemate of sorts. China is reportedly looking to rush a viable domestic semiconductor while the US seeks to stem this rise.

Geoff Blaber, vice president of research for the Americas with CCS Insights, said the deal “will rightly face huge opposition” from ARM’s customers.

He said: “An acquisition by Nvidia would be detrimental to ARM and its ecosystem. Independence is critical to the ongoing success of ARM and once that is compromised, its value will start to erode.”

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 their business performance.

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