NVIDIA and the 3.25 billion ARM, a deal about to break

We are almost a year into the NVIDIA and ARM series of events where the former wants to buy the latter and is only running into problems in every country in the world. Nothing less than 40 billion dollars to get hold of all their IP, but apparently this could not be closed, since now it is reported that Huang’s could withdraw given the confrontations, which would mean paying a billion dollar figure in expenses and management to SoftBank. The agreement between NVIDIA and ARM hangs in the balance.

18 months, that’s how long NVIDIA said it would take to close the deal to dominate the overall market that would total 90% of the world’s chips and in any specific sector. The term ends this March and there are more confrontations than agreements, which is suggesting that NVIDIA cannot acquire ARM and that will have a cost at all levels.

Dizzying figures in the agreement between ARM and NVIDIA

According to reports, the data offered if the agreement does not come to fruition are scandalous: 2 billion that NVIDIA has already paid at the time of the signing of its agreement with Softbank plus the break-up fee of 1.25 billion in total that they have to pay whether or not an agreement is reached.

That is to say, 3.25 billion which can be directly flushed down the toilet if NVIDIA does not enter into an agreement with relevant antitrust agencies, such as those in the EU or the UK. As we saw in the previous chapter of this already drama, NVIDIA continues to defend itself from regulators by arguing different approaches that do not seem to convince said regulators, but the offer still stands:

“We continue to hold to the views expressed in detail in our latest regulatory filings – that this transaction provides an opportunity to accelerate ARM and drive competition and innovation,” Bob Sherbin, spokesperson for NVIDIA.

From SoftBank there is also hope, the problem is that if said agreement is made and signed, NVIDIA would not only become a competitor as it is right now with all manufacturers, but it would also be a supplier with less competition, only Intel and AMD in their respective ISAs.

The global semiconductor business at stake


And it is that here what is at stake is the control and the global business of the entire semiconductor industry, where removing Intel, TSMC and Samsung the rest of the companies that depend on ARM would pass to the exclusive control of NVIDIA.

Right now, as the chart above shows, NVIDIA is the second largest company in the world by market capitalization, extremely close to TSMC. Let’s imagine that it absorbs a large part of the capitalization of Broadcom and Qualcomm by going from a competitor to a supplier of chips … It would go to number one with a lot of difference over its rivals in said market capitalization.

Neither China, nor the EU, the United Kingdom nor even the US seem to have it clear. Qualcomm’s experience in trying to acquire NXP Semconductors N.V. for $44 billion ended in two years of struggles and obstacles that made this giant give up the water. For this reason and given the time that has passed and the little that remains until March within NVIDIA, it seems that dissenting and defeatist voices are emerging, as well as divisions.

Many are apparently resigned to defeat, others think that it is possible that with the FTC judgment the criterion that grants more merits and advantages to the acquisition than to the current state of both companies will be imposed. The main problem is that the US vetoed Chinese manufacturers in its territory, such as Huawei, and therefore there is nothing to suggest that the Asian government agrees to give the go-ahead. 3.25 billion they can go overboard, there are two months left, will they make it?

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