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The biggest M&A in the chip industry is coming? Nvidia is rumored to negotiate with SoftBank for the acquisition of ARM

(Original title: SoftBank’s Chip Company Arm Said to Attract Nvidia Interest)


Netease Technology News July 23 news, according to foreign media reports, people familiar with the matter said that the chip design company ARM of Japan's Softbank Group is attracting interest in the acquisition of graphics and image chip manufacturer Nvidia.


According to people familiar with the matter, Nvidia has been in contact in recent weeks on a potential transaction to acquire ARM. People familiar with the matter also said that there may also be other potential bidders.


Earlier there were reports that Japan’s Softbank, led by Sun Zhengyi, was exploring the sale of part or all of its shares in ARM through private transactions or public listings. People familiar with the matter said that Nvidia’s interest may not facilitate the transaction, and SoftBank may still allow ARM to seek a listing. Representatives of SoftBank, Arm and Nvidia declined to comment.

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Relevant data show that the acquisition of ARM may become the largest transaction in the history of the chip industry. Currently ARM is owned by Japan's SoftBank and Vision Fund. In 2016, SoftBank spent approximately US$32 billion to acquire ARM, the largest listed technology company in the UK at the time.


Since then, the Philadelphia Stock Exchange chip index has risen by 185% because investors have invested a lot of money in the chip industry. They believe that, driven by new markets and technologies such as automobiles and artificial intelligence, the chip industry will grow rapidly.


In the same period, Nvidia's stock price has risen nearly 8 times, with a market value of approximately $254 billion. The Santa Clara, California-based company has transferred its dominant position in graphics and image processing chips to new areas such as artificial intelligence processing, and has taken a place in the emerging self-driving car system.


These moves make Nvidia pose a threat to more companies using ARM technology, including Intel, Qualcomm and AMD. At the beginning of July this year, Nvidia's market value briefly surpassed Intel.


People familiar with the matter said at the time that SoftBank previously held part of Nvidia's shares and quietly accumulated $4 billion worth of shares in 2017. But SoftBank said in early 2019 that the Vision Fund has sold all of its shares in Nvidia.


ARM sells chip designs and also sells instruction sets for chip and software communication. The related intellectual property rights owned by ARM are the foundation of modern electronic products and the core value of the company. Even companies that design their own chips, such as Apple, are using ARM's instruction set.


According to informed sources, SoftBank also approached Apple to assess its interest in acquiring ARM. The two companies had preliminary discussions, but Apple does not intend to propose an acquisition. This is because ARM's authorized operations do not match Apple's software and hardware business model. Regulators may also worry that Apple has a company that provides key authorizations for so many competitors' products. An Apple spokesperson declined to comment.


Nevertheless, Apple and ARM are closely linked. ARM technology is an important part of the more than 2 billion custom chips Apple has provided for iPhone and other devices in the past 10 years. Later this year, Mac computers will also begin to rely on ARM's design.


SoftBank has been selling some of its valuable assets, including its shares in Alibaba and the majority of shares in wireless operator T-Mobile America, in order to buffer its cash reserves and help withstand negative economic impacts. The activist investment company Elliott Management Corp. is also putting pressure on SoftBank, calling on the company to repurchase shares and change corporate governance to increase shareholder value.


When SoftBank acquired ARM, the two companies announced that they would recruit staff and increase chip design, rapidly expanding ARM's influence. ARM CEO Simon Segars (Simon Segars) said that the plan is to prioritize expansion and investment, and then control costs in preparation for returning to the open market.


Any customer trying to acquire ARM will trigger regulatory review. Other companies using Arm technology may oppose this transaction and require the owner to ensure that all companies continue to use ARM's instruction set equally. This situation just contributed to the Neutral SoftBank's acquisition of ARM in 2016. (Chenchen)



Source: NetEase Technology Report, translated by Google Translate

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