Opinion: Nvidia's bad deal is not yet done

September 14, 2020 // By Peter Clarke
Opinion: Nvidia's bad deal is not yet done
Nvidia has pulled off a coup in gaining agreement to buy IP licensor ARM Ltd. for up to $40 billion, but similarly large deals have failed in the past and so too may this one.

What the agreement shows is that Jensen Huang, founder and CEO of Nvidia (Santa Clara, Calif.), was keen to use his firm's strong share price and pandemic-driven cash flow for this deal while he could. It is a rare opportunity and he is ready to empty all piggy banks and print many share certificates to get it done (see ARM sale to Nvidia agreed at $40 billion). It should also be no surprise that Masayoshi Son, founder chairman and CEO of SoftBank Group Corp., was ready to sell ARM to a high and available bidder rather than to the best long-term owner.

One alternative, a consortium to try and raise the billions of dollars required, never really got off the ground (see Samsung wants consortium, not Nvidia, to buy ARM). But just because Nvidia is the only deal on the table doesn't make it a good deal or a done deal.

ARM – despite the assurances provided by would-be owner Nvidia – is set to commit the business-model sin of competing with its customers.

The ARM architecture is pervasive in electronics, being licensed to many major consumer electronics and leading semiconductor companies. It got there by being independent.

If the deal goes through how will the likes of Apple, NXP, Qualcomm, Renesas, Samsung and STMicroelectronics feel about their ARM licenses and the price of them when they are competing with their license provider Nvidia in such areas as automotive, 5G and AI for IoT?

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