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UPDATE 8-Nvidia to buy chip designer Arm for $40 bln as SoftBank exits

Mon, 14th Sep 2020 00:30

* Nvidia says Arm to retain neutral licensing model

* U.S. chipmaker to license out IP for first time

* Deal needs approval in Britain, U.S., China

* Industry questions how Arm can keep open approach
(Adds comments by Nvidia CEO, Arm co-founder)

By Sam Nussey, Stephen Nellis and Kate Holton

TOKYO/SAN FRANCISCO/LONDON, Sept 14 (Reuters) - Nvidia Corp
will buy UK-based chip designer Arm from Japan's
SoftBank Group Corp for as much as $40 billion, the
companies said on Monday, in a deal set to reshape the global
semiconductor sector.

The sale puts a vital supplier to Apple Inc and
others across the industry under the control of a single player
and faces likely pushback from regulators and rivals to Nvidia,
the biggest U.S. chip company by market capitalisation.

Within hours of the announcement, critics questioned how Arm
would maintain its open approach under U.S. ownership and at a
time of friction with China.

Nvidia CEO Jensen Huang emphasised that Arm would retain its
neutral licensing model and expand it by licensing out Nvidia
intellectual property for the first time.

"We want to grow Arm and make it become even greater," he
told analysts on a conference call.

For Softbank, the sale marks an early exit from Arm, which
it acquired for $32 billion. Chief Executive Masayoshi Son has
lionised the potential of Arm but is slashing his stakes in
major assets to raise cash.

The move comes as SoftBank executives, frustrated at the
group's share performance, have held early stage talks about
taking the Japanese technology group private, a source told
Reuters. Those talks could gain momentum following the Arm sale.
SoftBank's shares soared 10% in Tokyo.

Nvidia will pay SoftBank $21.5 billion in shares and $12
billion in cash, including $2 billion on signing. The deal will
see SoftBank and its $100 billion Vision Fund, which has a 25%
stake in Arm, take a stake in Nvidia of between 6.7% and 8.1%.

Nvidia will license its flagship graphical processor unit
through Arm's network of silicon partners. It will build chips
for devices like self-driving cars but also make its technology
available for others.

Taiwan-born Huang has promised to site a new artificial
intelligence research centre - equipped with its own
supercomputer - at Arm's base in the university city of
Cambridge and said the company was ready to talk to the British
government about expanding Arm's research efforts.

He stopped short of offering fresh job guarantees, however.

CHINA SCRUTINY

Arm does not make chips but has created an instruction set
architecture - the most fundamental intellectual property that
underpins computing chips - on which it bases designs for
computing cores.

Arm licenses its chip designs and technology to customers
like Qualcomm Inc, Apple and Samsung Electronics Co Ltd
. Apple's forthcoming Mac computers will use
Arm-based chips.

Arm will not become subject to U.S. export controls under
the deal, said Huang.

The purchase, which is subject to regulatory approvals
including in Britain, the United States and China, is likely to
come under close scrutiny in China, where thousands of companies
from Huawei to small startups use Arm technology.

Nvidia will take control of the minority stake in joint
venture Arm China. Arm is in dispute with the venture, which
licenses chip architecture to local companies, over its
management.

Co-founded by Huang, who has a penchant for leather jackets
and a Nvidia arm tattoo, the firm began as a graphics chip
designer but has expanded aggressively into products for areas
including artificial intelligence and data centers.

The Arm acquisition will put Nvidia into even more intense
competition with rivals in the data center chip market such as
Intel and Advanced Micro Devices Inc because
Arm has been developing technology to compete with their chips.

In what would amount to a direct challenge to those rivals,
Huang said it is "possible" Nvidia will build its own server
chips based on Arm designs.

Nvidia is buying up technologies in parts of the booming
data center business where it does not currently play.

In April it completed the purchase of Israel-based Mellanox
Inc, which makes high-speed networking technology that is used
in data centers and supercomputers.

The Arm deal is expected to close by March 2022.

SoftBank could be paid an additional $5 billion in cash or
shares depending on the chip designer's business performance,
with Arm employees to be paid $1.5 billion in Nvidia shares.
(Reporting by Sam Nussey, Stephen Nellis, Munsif Vengattil and
Douglas Busvine; Editing by Lincoln Feast and Richard Pullin)

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