ARM Nvidia deal is wakeup call to industry – updated
The $40bn sale of ARM to Nvidia has raised many opinions, with some of the largest ARM partners notably quiet.
“This is a seismic announcement and potentially represents a moment of the chickens coming home to roost for many manufacturers,” said Mark Lippett, CEO at processor designer XMOS in Bristol, UK. “Contrary to established business wisdom that businesses should retain control of their strategic assets, the chip industry has been content to divest itself of processing technology and rely on licensing ARM technology.”
“Of course, kudos to ARM for making this proposition as attractive as they have. However, that same IP now being in the hands of a competitor, rather than a strictly neutral party, changes the calculation entirely,” he said. “Although Nvidia has promised to retain an “open-licensing model and customer neutrality”, business-as-usual seems an unlikely strategy for the largest ARM licensees. Indeed, I believe it is a massive wake-up call for the whole sector.”
ARM’s large semiconductor customers such as Qualcomm, Samsung and NXP have been notable by their lack of comments, but ARM is quick to point out that partners had been involved in the discussions.
“I’ve had dialogue with many of our partners and it’s really important that ARM can maintain its business model to continue to serve the licensees that have been so loyal to us over the years and those were part of the conversations between us, Nvidia and Softbank,” said Simon Seagars, CEO of ARM.
“There are two areas that I think are concerning,” said Graham Curren, CEO at Europe’s largest independent chip design consultancy Sondrel, which is an ARM partner. “Firstly I share the views of Hermann Hauser in that some companies are going to struggle with the idea that they are buying from their competition and will look elsewhere so the current business model is likely to change.”
“Secondly, and for the UK, I only hope that this doesn’t go the same way as pretty well every other acquisition – transfer of IP and management decisions followed by lack of investment and ultimately closure,” he said. “Nearly all startups have gone this way, and look at Imagination, without even a CEO for 9 months, and now DisplayLink, with nearly all the staff under consultation of redundancy. Of course time will tell, and this has to get past the regulators yet.”
Yet there is a potential benefit, he says. “Perversely, would this leave us as the largest UK owned company in this sector?”
Others are more positive about the deal. “It’s in better hands under Nvidia than before,” said market researcher Malcom Penn of Future Horizons. “It’s capitalism and it’s a darned sight better than being sold to China like Imagination.”
“As for customers, if you outsource then there’s always a longer term security of supply risk … that’s a choice you make and yes, it can always go wrong. As for Nvidia, it’s a brilliant move. It takes them from 0-100 in the drop of a hat and with a guaranteed license fee/royalty income stream that’s going to keep the cash register ringing for years.
STMicroelectronics, which uses seven ARM Cortex-M cores for its STM32 microcontrollers and the Cortex-A microprocessor core, is neutral on the deal. “We have developed over the last 15 years with ARM a great co-operation and we acknowledge the information and we are very pleased that Nvidia confirmed they will maintain the model of ARM and the headquarters in Cambridge,” said Jean-Marc Chery, CEO of ST. “Beyond that we will see.”
“There’s potential for strategic peril in this deal, to be sure. ARM’s success is built on being the Switzerland of silicon and licensing its designs to giants like Apple, Samsung, and Qualcomm. Nvidia could tamper with Arm in ways that alienate these licensees,” said Glenn O’Donnell, vice president and research director at Forrester and his team. “Nvidia could start competing with those licensees or keep Arm’s best designs for itself. This heavy-handed approach seems unlikely, however; Nvidia’s savvy CEO addressed this issue during his announcement. Ultimately, the synergies between Nvidia and ARM technologies will be recognized in the medium term — for example, making chip technologies that improve the AI and graphics capabilities of endpoint devices, licensed as they have always been to OEMs.”
“There is no minimising the significance of this news for the whole sector. The future will be defined by where companies fall on this spectrum of responses. Whatever happens, this announcement has forced a major rethink of one of the key assumptions that so much of the chip business has been built on for at least the last 20 years. Wherever we go next it will not look like what we have today,” said Lippett at XMOS.
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