Opinion: Nvidia's bad deal is not yet done: Page 2 of 4

September 14, 2020 //By Peter Clarke
Opinion: Nvidia's bad deal is not yet done
Nvidia has pulled off a coup in gaining agreement to buy IP licensor ARM Ltd. for up to $40 billion, but similarly large deals have failed in the past and so too may this one.

Although in its press statement Nvidia laid out some intentions for preserving the ARM brand and business model and its headquarters in Cambridge, it was notable it did not say it would operate ARM as a wholly-owned subsidiary and put up Chinese walls of silence between ARM and Nvidia. If anything, the mood music is that Huang wants to merge the engineering resources of ARM and Nvidia for efficiency at the high-performance end of the market.

This lack of separation is surely a mistake.

Even with what professes to be a wall between ARM and Nvidia, licensees will pause to consider they may be competing on an uneven playing field, with Nvidia getting first access to IP breakthroughs and knowledge of what is coming. Any lack of separation will intensify that feeling and in the long-term cause licensees to look elsewhere. And the RISC-V architecture is standing ready as an alternative to ARM.

This deal could very easily accelerate the rise of RISC-V and the demise of ARM.

Sunday's announcement was constructed to try and assuage the concerns of some industry observers and politicians. Nvidia said ARM would continue to be headquartered in Cambridge, UK, and that it would expand R&D there. The expansion would include the creation of an AI research and education center and the building of an ARM/Nvidia AI supercomputer for research purposes and to aid startups.

However, one should always take such announcements with a pinch of salt. What is given in the future tense in a press release can also be taken way. ARM may well continue to be headquartered in Cambridge – for many years – or a few months.

Companies do not usually bind themselves in time against an unknowable future. So Nvidia has effectively promised ARM will be headquartered in Cambridge – until it doesn't suit Nvidia and Nvidia shareholders any more.

It is notable that in its press statement Nvidia talks of SoftBank and ARM honouring commitments made by SoftBank when it acquired ARM in 2016. One of those was to keep ARM in the UK and expand its employment there. These commitments apparently run out in 2021. So SoftBank was one company that was prepared to be bound in time, but 2021 is now just a few months away.

And Nvidia does not talk about honouring those commitments itself or whether it is prepared to make any new time-bound commitments.

Next: Can the UK take control?


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