GPU giant Nvidia approached SoftBank Group to express interest in acquiring its chip design subsidiary ARM, reports Bloomberg. The publication did not disclose the proposed deal’s financial terms, but the holding company bought the microelectronics brand for $32 billion in 2016. SoftBank, eager to offload assets to mitigate recent major losses, also reportedly talked to Apple about an ARM sale.
As of this writing, Nvidia, SoftBank, and Apple have not publicly commented on the industry-shaking transaction.
Why Nvidia Would Want to Acquire ARM
Nvidia is currently in the middle of a hot streak, and purchasing ARM would bolster its growth efforts.
The coronavirus pandemic prompted massive worldwide surges in Internet traffic. As a result, web service providers and data centers bought large quantities of GPUs to increase their capacity. The global health crisis also kicked off a mass work-from-home movement that led to employees upgrading their equipment to fulfill remote operation requirements.
As the world’s leading graphics card maker, Nvidia has played a key role in helping society adjust to the post-coronavirus landscape. By acquiring ARM, the manufacturer would significantly expand its chip design and instruction set portfolio. The company would also greatly increase its revenue generation as ARM has technology licensing agreements with Amazon, Qualcomm, and Samsung, among many others.
Nvidia is also smart to make a play for ARM right now. According to New Street Research LLP, ARM could be worth $44 billion if SoftBank took it public in 2021. The market analyst group also believes the chip design firm’s post IPO valuation could hit $68 billion by 2025.
Why SoftBank Approached Apple About an ARM Sale
SoftBank’s reported play to negotiate an ARM sale to Apple is odd but makes sense from a certain perspective.
On the one hand, the iPhone producer is not in the business of developing chipsets for third parties. The firm’s current strategy is making money from its ecosystem of interconnected hardware offerings and subscription services. If the Cupertino, California-based brand purchased ARM, it would likely fold the chipmaker into its in-house silicon division.
On the other hand, Apple spends a lot of money on ARM’s chip architecture and instruction sets. The Big Tech firm makes its A-series mobile device CPUs using the English company’s technology. The Silicon Valley corporation intends to use the brand’s designs for the processors in its forthcoming Mac computers.
SoftBank likely approached Apple thinking the $1.6 trillion manufacturer would be interested in snapping up ARM to lower its development costs and shrink its supply chain. But while the holding company is a motivated seller, the iPhone maker is not necessarily a motivated buyer. At present, the European Union is investigating the firm for possibly breaking its competition rules, and the U.S. Department of Justice is reportedly preparing an antitrust probe into its activities.
In the current environment, Apple probably does not want to risk inviting the inevitable scrutiny an ARM purchase would bring. For that reason, SoftBank might be better off selling its chip design unit to another large corporation. Considering its recent growth and comparative low-profile, Nvidia is a good choice.