Today’s Cache | A chip industry reshaping deal is under probe

Today’s Cache dissects big themes at the intersection of technology, business and policy. Written by John Xavier, tech news lead at The Hindu

A deal that could potentially reshape the global chip industry is under probe

To some, Arm might mean a part of the human body. This is understandable because the UK-based firm’s clients are not smartphone users, but their makers. Top chip manufacturers and smartphone makers like Qualcomm, Samsung and Apple are some of its customers.


Founded before the dawn of the Internet age, Arm was a spinoff that included the iPhone maker back in 1990. The Cambridge-headquartered company makes money from making chip blueprints and licensing them to as many customers as possible for fees. Nearly 90% of the world’s smartphones’ processors are powered by Arm’s chip designs.


The company’s last fiscal year revenue stood at $2 billion, and over 100 billion Arm-designed chips were shipped just in the last 5 years. In 2013, Japan’s Softbank bought the chip designer for $32 billion, and last September the multinational conglomerate said it has clinched a deal to sell Arm to Nvidia.


That deal, one of the largest semiconductor takeovers ever, caught the attention of regulators in four countries: China, E.U., U.K., and U.S.   

Britain's competition watchdog to probe Nvidia's Arm takeover.

Britain’s competition watchdog to probe Nvidia’s Arm takeover.  
| Photo Credit: Reuters



Nvidia makes graphics processors that powers videogames like the wildly popular Nintendo Switch. Its chips have been in hot demand during the pandemic as shelter-at-home mandates pushed up console-based gaming. The U.S.-headquartered company’s chipset also powers data centres, which also took centre stage during the pandemic due to remote work.


Beyond its use in consoles and data centres, Nvidia’s chips have become the workhorses of artificial-intelligence (AI) based computing, which is being adopted by several corporations. In 2020, Nvidia’s graphics processors accounted for about 95% of the Chinese market for AI servers, according to a white paper released by China’s IT Ministry.


That gives a sense on Nvidia’s market share, and why regulators are worried about its move to buy Arm. Two months ago, U.K.’s competition regulator warned the deal could damage competition and weaken rivals.


Now, E.U.’s antitrust watchdog has dealt another blow. The commission has extended its investigations, which is scheduled to end on October 27, and a four-month investigation into the deal would follow, according to a Reuters report.


It is unclear what China plans to do as Arm sells its licenses to Huawei, the once top smartphone maker.


For the U.S., the Nvidia-Arm deal will give it more geopolitical clout given the combined market share and advanced capabilities the chip designer offers its customers across the globe. But, for that to happen, the deal needs to get approved in Europe. And until then, Softbank’s Masayoshi Son must wait for his 2013 investment to give him a good return.


(This column was emailed on October 13.)


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