Aurich Lawson / Nvidia
In September 2020, Nvidia announced its intention to buy Arm, the license holder for the CPU technology that powers the vast majority of high-powered, mobile embedded systems worldwide.
The deal proposed by Nvidia would acquire Arm from the Japanese conglomerate SoftBank for $ 40 billion – a figure that is difficult to put into perspective. Forty billion dollars would represent one of the biggest technology acquisitions of all time, but around 40 Instagrams don’t seem to pay much for the control of the architecture that supports all known smartphones in the world, in addition to an impressive array of integrated controller devices, routers network, automobiles and other devices.
Today’s Arm doesn’t sell hardware
Arm’s business model is quite unusual in the hardware space, especially from the point of view of the consumer or a small company. Arm’s customers – including hardware giants like Apple, Qualcomm and Samsung – are not buying CPUs the same way you would buy an Intel Xeon or AMD Ryzen. Instead, they are buying the license to design and / or manufacture CPUs based on Arm’s intellectual property. This usually means selecting one or more reference core designs, placing several of them in a system on the chip (SoC) and tying them all with the necessary cache and other peripherals.
Arm has several licensing models for customers of different sizes, with varying levels of permission (or lack of permission) to innovate in their original reference designs. How much it costs to buy one of these licenses – in advance or by device manufactured – is a confidential question we asked many suppliers, with no difficult answers.
What exactly do you buy with Arm?
If Nvidia acquires Arm, the first and most obvious benefit is the design company’s licensing revenue stream – and it would not need to pay IP licensing fees itself. This, however, is probably the least important facet of the business.
Owning the full Arm would also allow Nvidia much more freedom to innovate in design. We spoke to several vendors who described the type of innovation that the RISC-V architecture allows as effectively impossible with Arm; vendors said “they just don’t allow it” to make changes, such as adjustments to the instruction set.
If Nvidia owns Arm, it will no longer face such restrictions. This could make it easier for the GPU manufacturer to innovate on the CPU side and free it from the necessary alliance it had with Intel in the manufacture of the world’s leading supercomputers … which probably seems increasingly important, as Intel is invading more and more deeply into Nvidia’s territory with its Xe GPUs and its oneAPI initiative, which aims to decouple the GPU-based machine from the underlying GPU hardware.
So far so good – and in fact, Nvidia describes its acquisition in exactly these terms, referring to it as “creating [the] the world’s leading computing company for the AI era. ”But it also offers potential for Nvidia’s advantage over the entire mobile computing industry, which is currently linked to the Arm instruction set (ISA) architecture.
Objections abound
There is no specific reason to think that Nvidia wants to enter the smartphone market – but if that happened, Arm’s ownership would potentially allow it to innovate with its own designs in ways that Qualcomm and other manufacturers are subject to strict licensing requirements do not. they could. The company may also choose to block access to Arm’s licenses entirely – either through its own recognition or as a result of pressure from the United States government.
According to CNBC, Qualcomm is one of Arm’s many licensees who continues to oppose the acquisition. Although Qualcomm has so far declined to comment publicly, CNBC sources say they believe Nvidia cannot complete the acquisition without “crossing certain lines that concern people” – most likely, the anti-competitive lines we discussed above.
Technology investors Nathan Benaich and Ian Hogarth clearly agree; its 2020 State of AI report quotes Arm’s founding investor Hermann Hauser, describing the acquisition as leading to significant job losses and adding the company to the U.S. “commercial arsenal” – making it possible for the U.S. government to block the specific company access to Arm designs. The UK Labor Party also has strong reservations and has urged the UK government to intervene.
Chinese technology firms like Huawei oppose the deal for the same reasons – not without reason, having already been subjected to several heavy efforts to prevent it and other Chinese firms from using what the Trump administration saw as “US technology” .