Chip guru casts doubt on Nvidia buying Arm

Nvidia founder and CEO Jensen Huang / Courtesy of Nvidia Korea

By Baek Byung-yeul

U.S. graphic chip giant Nvidia is reportedly closing in on a deal to acquire British chip-design company Arm, but a prominent semiconductor industry analyst says Nvidia is unlikely to create synergy effects from a buyout.

Jim Handy, a renowned U.S.-based analyst working for Objective Analysis, was giving his view on the controversial race to purchase the British tech firm, which was put up for sale by its mother company SoftBank of Japan.

He said the business models of the two companies are not complementary and therefore chances are slim that Nvidia would gain from it.

"Nvidia sells graphic chips (GPUs) and GPU boards that are based on those processors," Handy told The Korea Times, Wednesday. "This would imply that there is very little synergy between them and Arm."

Given Nvidia is selling GPUs and Arm is licensing its chip-design architecture, he said the combined company would also have no cost-saving effect.

"Usually companies acquire other companies who are in similar businesses," Handy said. "For example, if Arm licenses processors and another company licenses something else, then the two companies can merge and reduce the two sales forces down to one to save money."

He added, "I can't think of anything that Nvidia does that is similar to Arm's business practices. This implies that there would be no cost savings for the combined company if Nvidia acquired Arm."

SoftBank is considering either selling Arm or going through with an initial public offering (IPO) for its affiliate, as the Japanese company is cash-strapped after its $100 billion Vision Fund recorded losses for two straight quarters.

According to a recent report from London-based newspaper the Evening Standard, Nvidia is in exclusive talks to acquire Arm and the purchase process will be completed by the end of summer.

But Arm, which licenses its mobile chip architecture design to other companies such as Apple, Samsung Electronics and Qualcomm, is reportedly being purchased by a consortium led by several parties in the chip industry.

Nvidia is actively expanding its operations at a time when its graphic chips are increasingly used in emerging technologies such as artificial intelligence and machine learning. Based on this, the company acquired computing networking company Mellanox Technologies for $7 billion in April and also announced a plan to acquire networking software company Cumulus Networks in May.

However, industry analysts said chances still look slim that Nvidia would be the sole suitor for Arm because it would be difficult for the graphic chip maker to win approval from fair trade bodies in strong semiconductor industry countries.

Handy previously told The Korea Times that the consortium will be comprised of "fabless" companies or intelligent system design companies such as Rambus, Cadence and Synopsys because these firms are similar to Arm, generating revenue through intellectual property licensing.

Samsung, the world's largest memory chip maker, is considering acquiring between 3 and 5 percent of Arm to boost its plan to become a global leader even in the logic chip sector within a decade. The Korea Times was the first to report this.

The analyst also questioned why industry officials and analysts think that Arm must be purchased by other players, adding Arm could find a way to make a living by itself.

"What I don't understand is why people think that Arm must be acquired," he said. "I would think that it could be spun off as an independent company."

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