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Hardware Technology

What Will Happen To Arm Now? (digitstodollars.com) 46

Posted by msmash from the closer-look dept.
Jonathan Greenberg: Surprising almost no one, the US Federal Trade Commission has moved to block Nvidia's acquisition of Arm. We have written a lot about this deal and Arm in general, and wanted to touch on the topic in light of this news. We will save the background on this deal for that prior piece, but a few things stand out. Arm is seen by regulators as being too important to not be neutral. No other chip company can buy the company, as no one wants to compete with this key supplier of semiconductor intellectual property (IP), and almost every major chip company is now an Arm licensee, one way or another. So what will happen to the company now?

We have to first look at Arm's current owners, Softbank -- the Japanese investment firm. Their original impetus for selling Arm dates back a few years when they were under pressure from some expensive, high-profile deal failures, WeWork being the best known example among several others. At the time, Softbank needed to raise cash or at least convince their own investors that they had the ability to do so. Fast forward to today, and Softbank is in a much better position. They seem to have benefited strongly from the technology stock market bull run over the last two years. They made some big bets on the market and these have paid off, so the company is now in a much better financial position. So one option is for Sotbank to do nothing. Arguably, Arm needs to make some big investments to fund future R&D needs, but from the outside it certainly seems like Arm could raise sufficient funds on its own to do this.

Nonetheless, we have to think that Softbank would still like to exit. They almost made a pile of cash and having it snatched away is the kind of factor that spurs the brain to think of alternatives. The most likely outcome is an IPO of at least a minority stake of Arm. Prior to the Nvidia deal, Softbank seems to have gone far down this path. However, Softbank faced the problem that the public markets would have likely valued Arm less than what Softbank hoped (or possibly even what they paid for it) and far less than what Nvidia offered. The capital markets are in a different place today, and Arm is likely to attract a much higher valuation because semis are hot now in a way they have not been for a long time. One wrinkle for this plan is that an IPO will take some time to arrange. We would guess at least six months, possibly longer. No idea what the markets will look like then, and it leaves Arm in limbo when they should be doing all that R&D investment.
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What Will Happen To Arm Now? More

What Will Happen To Arm Now?

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  • No Other Chipmaker (Score:3)

    by JBMcB ( 73720 ) on Friday December 10, 2021 @02:37PM (#62067023)

    Why would it have to be a chipmaker? Huawei has more than enough capital to buy them, and bribe enough government officials to push through the "regulatory" hurdles.

    • Why would it have to be a chipmaker?

      It should NOT be a chipmaker. That will create an unacceptable conflict of interest, just as Nvidia did.

      Arm should either do an IPO and become independent, or Softbank should sell Arm to a private equity firm. Several PE firms specialize in tech and have sufficient capital to buy Arm.

      • That will create an unacceptable conflict of interest
        What would be that conflict?

        • What would be that conflict?

          Many Nvidia competitors and potential competitors are also Arm licensees.

          • Many Nvidia competitors and potential competitors are also Arm licensees.
            Yes.

            And?

            Again: What would be that conflict?

            I fail to see any confllct.

            • You really don't see how that would be a conflict of interest?

              It means NVIDIA would have better information to what's coming down the pipeline in the future before the competition does. It would allow them to better pivot towards what is to come before anyone else would even know it was a thought.

              And then there is pricing. While they may not be able to raise prices for others, they can lower for themselves so they have a better margin/lower prices on their products to unfair levels.

              This is just a few of man

              • NVIDIA is a GPU vendor.
                ARM is a CPU brain factory.

                Does not matter who owns whom, and if they cooperate internally or not.

                Hardly anyone of both would have an advantage about anyone else.

                Neither ARM will put any GPU stuff into its chip designs nor will NVIDIA put any ARM stuff into its GPUs.

                Both together perhaps end up on a SoC, sure. But that does not hurt Qualcom or Intel or any one licensing ARMs.

    • Re: (Score:2)

      by Pimpy ( 143938 )

      Huawei already has its own silicon division, and is an ARM licensee. The regulatory hurdles are an international concern, so they wouldn't be any better off.

      • Huawei already has its own silicon division, and is an ARM licensee. The regulatory hurdles are an international concern, so they wouldn't be any better off.

        Yes they would. Huawei has an advantage over Nvidia. Huawei's government, the Chinese Communist Party, would not oppose the purchase.

        • Huawei already has its own silicon division, and is an ARM licensee. The regulatory hurdles are an international concern, so they wouldn't be any better off.

          Yes they would. Huawei has an advantage over Nvidia. Huawei's government, the Chinese Communist Party, would not oppose the purchase.

          The Chinese government wouldn't oppose the acquisition in China. However, the US, UK, and Europe would likely veto any such deal. If the US is concerned about Chinese 5G base stations, concern about Chinese ARM cores in all US sold electronics would be many times greater. Nvidia buying ARM is hugely problematic, but Huawei buying ARM is way more problematic.

          • Re: (Score:2)

            by drnb ( 2434720 )

            Huawei already has its own silicon division, and is an ARM licensee. The regulatory hurdles are an international concern, so they wouldn't be any better off.

            Yes they would. Huawei has an advantage over Nvidia. Huawei's government, the Chinese Communist Party, would not oppose the purchase.

            The Chinese government wouldn't oppose the acquisition in China. However, the US, UK, and Europe would likely veto any such deal. If the US is concerned about Chinese 5G base stations, concern about Chinese ARM cores in all US sold electronics would be many times greater. Nvidia buying ARM is hugely problematic, but Huawei buying ARM is way more problematic.

            The point is the US gov is opposing the purchase by a US company. Huawei is not encumbered by a gov that puts the good of the market over national interests.

    • I'm sure an acquisition like that would go over well. Seriously, If the regulators wouldn't let nvidia have it, they definitely wouldn't let China have it.

      • Re: (Score:2)

        by ceoyoyo ( 59147 )

        It would be much more difficult to kill Huawei by starving them of chips if they owned the IP. Even more difficult that it's already turned out to be.

  • Nvidia still has plans to acquire a company named "Leg" ...

  • It is a UK company. Who owns the stock doesn't tell you anything about what the company is doing.

    It isn't run from Japan.

    If they want to sell it, all they have to do is sell it for a fair price to somebody that isn't a competitor. This isn't hard. Or they could just spin it off.

    • It is a UK company (?) (Score:4, Informative)

      by WormyOne ( 810309 ) on Friday December 10, 2021 @03:49PM (#62067359)

      I have no idea what is meant by 'It is a UK company'. Factoids to show how murky that statement is:

      • - From inception until first IPO in 1998, ARM was a UK company majority-owned by UK nationals, run by UK nationals in UK (Cambridge HQ)
      • - After IPO, and being internationally reachable on LSE, ownership diffused, though still largely UK owned (including instituional investors)
      • - Until 2014, the CEOs of ARM (R Saxby, W East) were UK nationals living in UK and regularly worked out of the UK HQ in Cambridge. Senior Management (CEO, COO, CTO, CIO) were still largely based in UK, though a number of senior roles had become US-based
      • - In 2014, Simon Segars, a UK national resident in USA (Silicon Valley) became CEO. Segars committed to moving back to the UK to lead from HQ. This did not happen, and an acceleration/concentration of US-based executive leadership began instead.
      • - until 2016 at least, the majority of ARM employees were UK based, and Cambridge HQ was by far the largest office (by headcount)
      • - 2016 saw acquistion of ARM by Softbank. 100% (or near enough) of shares were purchased by a Japanese entity. Concentration of senior management to USA (Bay Area) accelerated further. Acceleration of hiring in non-UK areas (Bay Area, Austin, notably) also resulted from new Softbank-fueled investment
      • - At end 2021 we have a Japanese-owned company, run by a UK CEO in USA, with many (most?) significant senior roles occupied by USA citizens residing in USA, and where the majority (data missing to assert this 100%) of employees are NOT UK-based.

      I find the last point hard to square with 'It is a UK company'. It also makes me laugh to see UK government raising not one but two streams of objection (markets, national security) to the Nvidia deal, when the same government waved the softbank deal through with nothing but a few conditions, to which Softbank has been careful to pay only lip service.

      • Re: (Score:2, Insightful)

        by Aighearach ( 97333 )

        You're just stuffing your head in the sand while spewing factoids you didn't take the time to understand, and comping to specious conclusions.

        If I start a company in the US, organize it as a corporation in my State, open an office here, hire workers here, and then sell all the shares to a Japanese national, the company is still a US company, still run out of the same office, still has the same employees.

        And then if those Japanese stockholders want to sell the shares to some company in France, or Iran, or wh

  • Have the BBC buy it (Score:5, Funny)

    by jfdavis668 ( 1414919 ) on Friday December 10, 2021 @02:49PM (#62067081)
    They can go back to making school computers
  • Trumps social media company TMNT will be worth like half a billion when acquired by media temptation SPAC. The largest SPAC is over 30 billion. If they can find investors to write a blank check for 25 billion, that would do it. It is all money laundering anyway.

  • Valuation? (Score:5, Informative)

    by sphealey ( 2855 ) on Friday December 10, 2021 @03:15PM (#62067207)

    What makes ARM LLC worth $40 billion? Seems that the major consumers of ARM's design output all pulled out of direct ownership or say in the operations, choosing to license the designs as suits their needs. What was left was essentially the equivalent of the University of Illinois' computer engineering group in the 1960s, creating theoretical designs that would be executed by some other profitmaking entity - or not. That's could be an enjoyable business to be in - as academic electrical/computer engineering was in the 1960s/70s - but it is not really worth much money. If a major university could buy it for $1-2 billion that would make sense but why would any rational entity pay $40 billion?

    • How much is something worth in a free market if nobody except Britons and Japanese can buy it? I predict future offers will be significantly lower. And clauses that cause the buyer to forfeit money if they cannot close will not be done again.

      • How much is something worth in a free market if nobody except Britons and Japanese can buy it?

        As much as Britons and/or Japanese vendors are willing to pay for it (in other words, a shitload, in billions.)

    • So, you want to tell us, you are unaware that the world is literally running on ARMs?

      https://www.statista.com/topic... [statista.com]

      • Re: (Score:2)

        by sphealey ( 2855 )

        Ya don't say? Still not seeing the value there. And I doubt the primary driver of ARM technology today, Apple, is paying much if anything in per unit royalties. Nor would anyone else who gets big enough: they would tell ARM "renegotiate our license or it become worthwhile for us to switch architectures".

        • 80% of all smart phones run ARMs.
          Most high level car embedded stuff is ARM.

          ARM is company that earns between 500M - 1000M per year.

          As long as there is no superiour competition, ARM is not going away.

          they would tell ARM "renegotiate our license or it become worthwhile for us to switch architectures".
          ATM there is no alternative to ARM. And the license fees are so low, everyone is happy to pay them.

  • The U.S. Federal Trade Commission can only block U.S. companies from purchasing other companies, be they U.S. or foreign. If Softbank, a Japanese company, want to sell Arm to a non-U.S. company, the only thing the FTC can do is protest it. Let's just hope some Chinese or Russian company doesn't get the go ahead from Japan.
    • Seemed silly that the FTC blocked this but has let so much other cannibalism within sectors and to foreign companies. I get it, there is only a few MAJOR chipmakers right now but there seems to be more competition there then in many of industries. If NVIDIA was being acquired by ARM or a Chinese company (pre-Huawei debacle) then this would likely just have happened... Nevermind that I can get (realistic) internet from one provider or dial-up. Or I can have my choice of crummy-telecom-1 or crappier-telecom-

    • Re: (Score:2)

      by jabuzz ( 182671 )

      There will be contractual clauses in the sale to Softbank that give the UK government veto on the sale. They would have been insisted on by the UK government as a condition of the sale to Softbank.

  • Comment removed based on user account deletion

  • would destroy the microprocessor ecosystem as they would force other companies that license ARM IP out of the picture, it would be ugly. ARM's customers don't want that.

    • Re: (Score:2)

      by SeaFox ( 739806 )

      Aren't Arm's licenses perpetual? And Apple for one is only licensing the instruction set, not the whole architecture I thought, so couldn't they just keep making their Silicon CPUs with Arm v8 instruction set?

      • Aren't Arm's licenses perpetual? And Apple for one is only licensing the instruction set, not the whole architecture I thought, so couldn't they just keep making their Silicon CPUs with Arm v8 instruction set?

        Apple has the highest-level ARM License. An Archictecture-Class License.

        They can pretty much do what they please:

        https://news.ycombinator.com/i... [ycombinator.com]

      • If ARM were required by a chipmaker eventually the chipmaker would be able to push out (eventually) all the other chipmakers and nobody would be able to make arms CPUs but that chipmaker otherwise there would be no point of acquiring arm. You probably wouldn't acquire arm just to free licensing.

        Even if this scenario did not happen they could also edge people out by only working on their projects or not providing enough support.

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