NVIDIA announces their purchase of ARM

This week’s bombshell news in the semiconductor industry was NVIDIA’s announcement of their intent to buy Arm from SoftBank, a Japanese investment firm, for $40 billion. This deal will have widespread implications for both consumer electronics, like the device you are reading this right now, and the larger electronics industry as a whole.

Arm Limited is a UK-based semiconductor company that designs its own CPU architecture called ARM. Prominent customers of ARM include Apple, Samsung, and Qualcomm, who use ARM to design their mobile chips — the smartphone in your pocket is almost certainly powered by ARM.

NVIDIA is also a semiconductor company, but it's based in the US and known mostly for its GPUs, such as the GeForce series for PC gamers, and GPUs designed for AI applications, such as the A100. NVIDIA also designs the CPU used in the Nintendo Switch, which is, as you may have guessed, based on ARM.

The implications of this deal are widespread. NVIDIA can finally step into the computer CPU market instead of only focusing on the GPU market, allowing them to compete with companies like Intel and AMD. This completes NVIDIA’s product folio, which currently does not include CPUs, and it puts the company in line with AMD and Intel, who develop both CPUs and GPUs. GPUs are used extensively in artificial intelligence, allowing NVIDIA to create AI solutions that bundle the advantages of both CPU and GPU technology — which is more difficult for NVIDIA’s competitors.

Second, this deal puts NVIDIA in a very strong position — possibly too strong — now that the company controls the chip architecture others need to design their CPUs. This puts NVIDIA in a powerful position to negotiate against them. A good example of this is Apple, who use chips based on ARM in all their mobile and tablet devices, with plans to develop ARM chips used in Mac laptop and desktop lineup as well. With NVIDIA’s ownership of ARM, Apple might have to agree to use NVIDIA GPUs in their products instead of their current selection of AMD GPUs, leading to the rise of a monopoly.

This can draw significant attention from regulators, which leads to a chance that this deal will not go through. There are a lot of parties at stake here, and there are a lot of incentives to block the deal. The UK, where Arm Limited is based, might reject the plan, since handing the technology to the U.S. could lead to job loss within the UK and more leverage for the U.S. in trade talks. Huawei, and by extension China, is not happy with the deal either since Huawei chips are ARM-based, and handing ARM over to the U.S. could result in more sanctions on Huawei. U.S. regulators might block the deal as well, since it could potentially create a market-dominating semiconductor company that leaves no room for its competitors, which may lead to inefficiencies and lack of innovation.

NVIDIA’s proposed acquisition of ARM may create a brighter future for the development of AI, but it could also lead to a monopoly in the semiconductor industry, as well as significant government interference.