Nvidia Confirms $40B Arm Deal Is Dead Due To ‘Regulatory Challenges’

‘Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,’ says Nvidia CEO Jensen Huang. ‘Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm.’

Nvidia terminated its $40 billion bid to acquire British chip designer Arm due to “significant regulatory challenges,” the chipmaker confirmed early Tuesday morning.

Arm’s current owner, Japan-based SoftBank Group, will take the chip designer public through an initial public offering, Nvidia and SoftBank said in a joint press release, confirming reports from several hours before that said the Nvidia-Arm deal had collapsed.

Nvidia and SoftBank said the decision was mutual, resulting from “significant regulatory challenges preventing the consummation of the transaction, despite good faith efforts by the parties.”

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“Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come,” said Nvidia CEO Jensen Huang in a statement. “Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm.”

SoftBank announced that it will start preperations for an IPO of Arm within the fiscal year ending March 31, 2023. Arm was previously a public company prior to SoftBank acquiring it in 2016 for $32 billion.

Arm also announced it had appointed Rene Haas, head of the Arm IP Products Group, as the company’s new CEO and board member in preparation for the IPO. Haas succeeds Simon Segars, who is stepping down from his CEO and board roles after 30 years with the company.

“Arm is becoming a center of innovation not only in the mobile phone revolution, but also in cloud computing, automotive, the Internet of Things and the metaverse, and has entered its second growth phase,” said SoftBank CEO Masayoshi So in a statement. “We will take this opportunity and start preparing to take Arm public, and to make even further progress.”

As part of the agreement, SoftBank will retain a $1.25 billion break-up fee that was prepaid by Nvidia. Nvidia will also retain its 20-year Arm license, which the chipmaker has been using in part to design a data center CPU that will take on Intel and AMD in high-performance computing. The chipmaker uses Arm technology in other products, including the BlueField family of data processing units.

The termination of the deal comes two weeks after Bloomberg reported that Nvidia had told partners that it doesn’t believe its $40 billion acquisition of Arm would close in the face of serious concerns from regulators in the United States, United Kingdom and European Union.

One solution provider contacted recently by CRN questioned the benefit Nvidia’s pursuit of Arm would have brought to the channel.

“I couldn’t understand why Nvidia needs to own Arm when Arm is open. From my position as a partner, I feel like they’re still going to be able to bring the same solutions to me as if they owned Arm,” Eliot Eshelman, vice president of strategic accounts and high-performance computing initiatives at Microway, a Plymouth, Mass.-based Nvidia partner, told CRN in December after the Federal Trade Commission sued to block the acquisition over antitrust concerns.

“They’re going to design whatever CPU, GPU, networking mix that they can dream up, and I’m going to be able to ship it, and it doesn’t matter who owns Arm,” Eshelman said.

Several analysts said the Nvidia-Arm deal was unlikely to go through after the FTC lawsuit, which added to apprehension from other regulators that the merger would harm competition.

In its December lawsuit, the FTC said Arm’s role as the “Switzerland” of the semiconductor industry is a prime reason why it believes Nvidia’s acquisition of the British chip designer would harm competition in the data center market, among other markets.

Many companies, including Apple and Amazon, license Arm’s technology to build their own processors, and Nvidia’s direct rivals, Intel and AMD among them, also rely on Arm for some products such as FPGAs and SmartNICs. AMD uses Arm for security chips in its EPYC server processors.

If Nvidia were to acquire Arm, the FTC alleged that it would create uneven access to Arm’s technology between Nvidia and other companies. This would reduce competition and, in turn, reduce product quality, innovation and choice while also increasing prices for customers, the agency said.

Nvidia had repeatedly promised that it would invest in Arm’s research and development, maintain Arm’s open licensing model and “create more opportunities for all Arm licensees and expand the Arm ecosystem.” This, however, did not allay the concerns of the FTC and other regulators, including the United Kingdom’s Competition and Markets Authority, which was also investigating the deal.