If Nvidia buys Arm, how open will it remain?

For weeks, we’ve heard rumors that Nvidia has been in talks to acquire Arm from Softbank. The latest acquisition price is more than $40 billion, according to a Wall Street Journal report based on unnamed sources.

SoftBank took Arm private in 2016 for $32 billion. At the time, SoftBank CEO Masayoshi Son said he was preparing for the Singularity, a day when AI collectively becomes more intelligent than human beings. But SoftBank has run into a cash crunch after losing billions of dollars due to the pandemic and bad bets on Uber and WeWork.

There’s no question Arm is a valuable asset, as its licensees ship more than 20 billion chips a year for everything from smartphones to tablet computers and internet of things sensors. Earlier this year, Arm said its licensees had shipped more than 160 billion chips using ARM designs to date. Arm doesn’t make the chips itself. It is the steward of the ARM processor architecture, and it creates designs other companies license and use in their own chips for just about everything electronic. Apple plans to use ARM-based processors to replace Intel processors in upcoming models of its Mac computers.

The question is how open Nvidia would keep the ARM ecosystem if it succeeds in its acquisition. Nvidia has been a fierce competitor to rivals such as Intel and AMD. Apple has used tech from Imagination Technologies to create the graphics processing components in its iOS devices, and it hasn’t been a huge customer for Nvidia’s graphics on the Mac side. Nvidia has competed to become a behemoth of the PC industry, with $13 billion in sales (on a trailing 12-month basis) and a market value of $330 billion. The latter is higher than Intel’s value of $144 billion.

If the deal goes through, these big rivals would become Nvidia’s customers. It would make sense for Nvidia to treat Arm as an independent subsidiary and continue its open customer relationships with rivals in the processor business. Arm still has rivals, such as the royalty-free RISC-V architecture, which is enjoying increasing support from companies that had tired of Arm’s licensing fees.

The deal would secure Nvidia’s future access to processor technology, whereas if Arm fell into the hands of rivals, Nvidia could get shut out. Nvidia would also gain access to Arm’s engineering team, which numbers over 6,000 people. Nvidia itself has more than 13,000 employees. Owning Arm would be a kind of insurance policy for Nvidia, particularly if it doesn’t trust any entity that has control over key intellectual property for its AI and mobile processor efforts.

Nvidia could also exploit the benefits of combining its graphics chips with Arm’s processor technology. Intel and AMD have long been able to create more integrated solutions that combine graphics and processor technology. Intel’s integrated graphics and processors have a hold on the low-end PC market, while standalone graphics chips from AMD and Nvidia occupy the middle and high end of the market. AMD has also combined its x86 processors with graphics to create special solutions for game consoles. Nvidia could attempt to do something similar, as ARM processors are making some headway in both servers and low-end PCs.

Apple could step into the bidding and acquire Arm if it is concerned about a deal with Nvidia, which Apple has had a rocky relationship with. But such a move might also attract more government scrutiny at a time when Apple is already facing antitrust investigations. And since Nvidia recently surpassed Intel in market value, Nvidia has the ability to outbid Intel, which is developing its own high-end graphics.

In my last interview with Nvidia CEO Jensen Huang, I asked him about buying Arm. He replied, “That’s just a rumor!”

Nvidia declined to comment at the time of writing, and Arm has not yet responded to a request for comment.