I mentioned the analysis of this company in section 3-3 of the book “The Rules of Super Growth Stocks Investing”. The investors are very smart and have made a fair evaluation of this company. Let’s first look at the stock price performance of nVidia (ticker: NVDA) over the past five years-1,566.94%.
In July 2020, NVidia (ticker: NVDA) proposed to buy Softbank Group (ticker: SFTBF)’s ARM, a British semiconductor manufacturer, for US$40 billion. For technology industry, this acquisition dropped a depth bomb in the water.
Even after Nvidia publicly announced the acquisition of AMR, it tried its best to complete the last piece of the company’s long-term plan–that is, the central processing unit, which is one of its most vulnerable areas, in order to compete with Intel (ticker: INTC)’s x86 IP.
The problem is that in the past five years, the landscape of the semiconductor industry has changed drastically. Intel has long been not the undefeated king of the semiconductor industry; Nvidia itself has already replaced Intel and become the world’s largest listed semiconductor company by market value, and the gap between the two is continuing to widen. Readers are advised to refer to my two previous articles “Nvidia is changing the gaming rules ” and “Intels current difficult dilemma“.
But the sky does not follow people’s wishes, and Nvidia’s wish seems extremely unlikely to be fulfilled.
How influential is ARM?
I have read a market survey report. Currently, about 62% of the semiconductor processors in use worldwide are ARM-baed technology (95% of mobile communication devices such as mobile phones and tablets), and x86 technology is around 35% (mainly used in personal computers), it can be seen that ARM has a strong influence on the global semiconductor industry.
As of today:
- More than 200 billion chips have been shipped and used ARM technology since inception.
- There are 13 million program developers working on ARM technology chips worldwide.
- ARM technology used by more than 1,600 business partners.
- More than 320 IP licensors.
- In the fourth quarter of 2020 alone, 6.7 billion chips using ARM technology have been produced globally-far more than the total of chips using x86, ARC, Power, and MIPS combined.
What will happen if it comes true?
The Nvidia transaction may also prompt chip companies to move towards another open source instruction set architecture RISC-V supported by a non-profit foundation and not controlled by any entity, that is, vendors do not have to pay RISC-V the authorization fee. This is the biggest difference from ARM. The industry generally believes that Nvidia’s move may accelerate the industry trend that is shifting from ARM design to RISC-V technology. Especially China, China is currently the country that supports RISC-V most actively. Alibaba has even introduced its own developed chips using RISC-V, and has also transplanted the Android system to the self-developed RISC-V chips.
Position of related companies
ARM said that it would not remove the firewall, so Nvidia could not detect customer confidential and early information. But no one believed Nvidia’s guarantee.
Hauser, the founder of ARM, opposed the acquisition by Nvidia, which would damage ARM’s neutrality and ability to meet the needs of many different companies and suppliers.
Nvidia’s rivals, Intel, Alphabet, Amazon, Tesla, Samsung, and Microsoft, and other technology giants have expressed concern that Nvidia may restrict the technology supplied to competitors by Nvidia, or increase licensing prices. And these technology giants have formed an exciting alliance to oppose Nvidia’s acquisition of ARM.
However, according to Nvidia’s own statement, the acquisition of ARM has been reported to have received support from the three major chip makers including MediaTek, Broadcom, and Marvell.
Positions of regulatory agencies in various countries
After Nvidia announced the acquisition, even though his posture was extremely low, it did not go well. No country agrees with the regulatory agencies of major countries in the world:
- United Kingdom: The British government, where the head office of ARM is located, intervened in the Nvidia M&A case. The CMA has repeatedly stated that it will strictly review it, and the Prime Minister even publicly expressed its opposition.
- United States: Regulators stated that Nvidia’s deal with ARM harmed the internet and the market for autonomous driving car chips. The Federal Trade Commission is investigating Nvidia’s acquisition of chip manufacturer ARM.
- EU: Officials of the EU antitrust agency revealed that they are not sure whether this application can be passed easily. The authorities are skeptical of Nvidia’s promise to allow fair access to the conspiracy design.
- South Korean chip industry executives and experts stated that this transaction will intensify the competition between Nvidia and other chip companies such as Samsung on future technology fields such as autopilot, and it is unlikely to pass.
- China: So far, China has not formally expressed its position. However, Chinese state media called Nvidia’s ARM acquisition “disturbing” and urged regulators to be cautious. However, due to the strong anti-China strategy of the United States, the United States has been clear about semiconductors since the Trump era. Even if China has not expressed its position, it is generally believed that if ARM falls into the hands of the United States, mainland China’s technology companies will definitely be at a disadvantage in the market. It is impossible for China to agree to this merger, because it will add fuel to the United States to hinder China’s chip development. There are also rumors that if Nvidia can make ARM China independent without using any GPU & AI IP, it may also obtain the consent of Chinese regulators.
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