Nvidia's Arm Holdings takeover gets vote of support

Three top chipmakers have expressed support for Nvidia's controversial $40bn takeover of Arm Holdings. But it could still fail. Matthew Partridge reports

Semiconductor chip
Nvidia’s controversial takeover could come unstuck
(Image credit: © Matthew Horwood/Getty Images)

Nvidia’s proposed $40bn takeover of British semiconductor group Arm Holdings, which is being sold by Japan’s SoftBank Group, received a boost after three of the world’s largest chipmakers “expressed support” for the “controversial” deal, says Priscila Rocha on Bloomberg. Broadcom Corp, MediaTek and Marvell Technology Group are the first customers of Arm to speak out in favour of the takeover. Their support undermines claims from rival Qualcomm and tech giants including Microsoft that Nvidia could use its control of Arm to “limit the supply of the company’s technology to its competitors or raise prices”.

The apparent endorsement from several leading chip firms comes at a “crucial time” for Nvidia’s planned takeover, says Jamie Nimmo in The Sunday Times. This is because the UK competition watchdog is now “preparing to deliver its judgement” on the deal following a review on both competition and national security grounds – a process that has “cast doubt” on the tie-up taking place. The deal is also in the process of being scrutinised by other regulators in Europe, the United States and China – opposition from any one of which could effectively veto it.

What the customers really think

Those who claim that the customers’ comments represent a full-throated endorsement of the deal are reading too much into them, says Dan Gallagher in the Wall Street Journal. If you look at what they say closely, their support “seems lukewarm at best”. While MediaTek’s chief executive Rick Tsai was quoted as saying that the chip industry “would benefit from the combination”, Broadcom’s CEO Hock Tan simply noted that “Nvidia has assured the industry” that it will grow its investment in Arm and continue licensing the technology on a “fair basis”. And while Marvell claims to be “supportive” of the deal, its CEO has also said that he “wouldn’t be sad” to see it collapse.

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Furthermore, even if the deal manages to withstand scrutiny on competition grounds, there are other reasons why it could come unstuck, says Tony Owusu on TheStreet. Analysts at Citi reckon that there is only a 30% chance of the deal going ahead. This is because, in their view, opposition from China is still likely to be a major hurdle. Chinese firms claim that Arm’s acquisition by a US firm would make it much easier for Washington to pressure the company into stopping exports to China if relations between the two countries worsen.

If Nvidia’s takeover of Arm does fall through, then Arm could return to being a listed company, which it was before it was snapped up by SoftBank in 2016, says James Titcomb in The Daily Telegraph. US technology giant Qualcomm has said it could buy a stake in Arm “alongside a consortium of industry players” if its owner, SoftBank, were to float the company. Unsurprisingly, Nvidia argues that such a move “would hold back Arm’s development”.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri