US firm Nvidia to buy Arm from SoftBank for $40 bn

Santa Clara, California-based graphics processing unit (GPU) and chipset maker Nvidia is set to acquire British semiconductor giant Arm from SoftBank in a $40 billion deal.

Nvidia will pay the Japanese conglomerate $21.5 billion in shares and $12 billion in cash, including $2 billion on signing, according to a statement.

SoftBank may also receive up to $5 billion in cash or common stock under an earnout construct, subject to satisfaction of specific financial performance targets by Arm, it said. Nvidia will also issue $1.5 billion in equity to Arm employees.

The transaction, which is expected to be completed in 18 months, is subject to obtaining regulatory approvals in the UK, China, the European Union and the United States.

The acquired unit will operate as a separate division, retain its headquarters in the UK, continue to follow its open licensing model and maintain customer neutrality, the statement said. 

Nvidia operates in the same space as several of Arm customers, such as Intel, AMD and Apple. The latter also counts Qualcomm and Samsung as its clients, all of whom rely heavily on it to architect and manufacture the chipsets used in their devices.

The biggest chipmaker in the US by market capitalisation, Nvidia will also expand Arm’s research and development centres in Cambridge, UK. It will establish a new artificial intelligence (AI) research and education centre and build an Arm-Nvidia powered AI supercomputer for advanced research purposes in the city.

In a call with media and analysts, Jensen Huang, CEO and founder of Nvidia, said that the acquisition would contribute to the UK by hiring more engineers and spending more on research through the AI research centre in Cambridge.

“The UK government will realise that we are making a very significant investment in the UK,” Huang said.

SoftBank had acquired Arm in September 2016 to bolster its internet of things offerings.

“Since acquiring Arm, we have honored our commitments and invested heavily in people, technology and R&D, thereby expanding the business into new areas with high growth potential,” Masayoshi Son, chairman and CEO of the SoftBank Group, said.

Arm central processing units (CPUs) are inbuilt into smartphones, personal computers, cloud data centres and supercomputers. In 2019, around 22 billion computers were built with Arm chipsets, with the total number of computers with Arm technology pegged to be around 180 billion.

“Someday, trillions of computers running AI will create a new internet — the internet-of-things — thousands of times bigger than today’s internet-of-people,” Huang, who founded Nvidia in 1993, said.

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Nvidia’s previous acquisition was Sunnyvale, California and Tokneam, Israel based Mellanox Technologies for $7 billion. Mellanox provides end-to-end connectivity solutions for servers and storage that optimises data centre performance.