Nvidia ready to walk away from $40bn deal with Arm

Nvidia intends to abandon its acquisition of Arm Ltd. The deal is valued by experts at $40 billion. So far there is no official announcement about the abandonment of the deal. However, the owner of Arm Ltd company SoftBank Group Corp, and there are no statements about the willingness to complete the deal.

Announcement of Arm purchase

The deal, announced in September 2020, was expected to be the largest in the history of the semiconductor industry, but its implementation could be hindered by an extremely negative perception on the part of regulators as well as professional associations in the chip industry. In particular, the U.S. Federal Trade Commission in December 2020 made a statement about the advisability of cancelling the deal, because if it is completed, Nvidia will have a near monopoly position in chip production.

Will Nvidia be banned from buying Arm?

Also, the deal was very negatively perceived in China. The country’s authorities announced their intention to block the completion of the deal. It is known that the heads of Nvidia and Arm Ltd are still negotiating with the regulatory authorities. The top management of both companies are supporters of completing the deal.

Nvidia’s press office said the deal would strengthen the company’s competitive position in the market and make it more innovative. SoftBank Group Corp. shares this position and the company also told the media that it hopes to complete the deal.

If the deal does go through, it will be a colossal victory for one of its main initiators, Nvidia CEO Jenson Huang. Then he will be able to turn Nvidia into a near-monopoly chip maker, making the company a leader in the US semiconductor industry with a record capitalisation of more than half a trillion dollars.

However, such deals have not previously resulted in acquisitions. Specifically, in 2018, Qualcomm Inc. refused to acquire NXP Semiconductors NV due to pressure and market regulators’ positions. A record-breaking deal worth $44 billion fell through.

Who are Arm?

Arm Ltd is the world’s leading manufacturer of chips for various equipment: mobile devices (phones, tablets), onboard computers and electronic systems in cars, all kinds of industrial equipment.

For this reason a huge number of companies are interested in the work of this manufacturer on a neutral business model. When it was reported about the possible sale of Arm Ltd company Nvidia, many influential firms in the electronics industry have expressed concern about the possible unlimited access to Nvidia key technologies in the industry.

In particular, major companies such as Qualcomm, Microsoft, Intel, and Amazon.com Inc. strongly oppose the sale. Ironically, the deal has also caused controversy within Nvidia’s management team. Some influential employees left the company after a conflict with management.

Despite the very tumultuous processes that accompany the still far from completed deal, SoftBank Group Corp. is still interested in working with Nvidia. The fact is that Nvidia has recently doubled its capitalisation, and for Arm Ltd this means far more benefit than even the previously announced $40 billion

But so far the deal is “hanging in the air” because of the principled position of the Chinese authorities and the opposition of a number of large companies that are not interested in the appearance of a monopolist in the chip production market.