Nvidia/Arm: antitrust concerns put focus on alternative options

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SoftBank needs a Plan B. One year on, prospects for its planned $54bn sale of UK chip designer Arm to Nvidia are souring. Antitrust watchdogs are circling. The European Commission is set to launch a formal competition probe while the UK’s Competition and Markets Authority has dismissed Nvidia’s efforts as insufficient. China, where Arm has its own problems with a rogue joint venture partner, is likely to join the chorus.

The deal is far from dead. A handful of Arm clients have rallied round Nvidia. South Korea’s Samsung provides precedent for vertical integration without compromising access to third party clients. Contractual remedies may save the day.

But SoftBank would be doing a disservice to shareholders if it did not pursue other options. The $1.25bn break fee is small comfort when a profitable exit has been stymied.

The obvious alternative is an initial public offering. True, shareholders are unlikely to stump up as much as a trade buyer able to bring synergies to bear. But the timing works. Liquidity is powering markets higher and demand for most types of chips is rapacious.

The window may not stay wide open for long. For one, mutterings of a chip winter are already percolating through sections of the industry. Chipmakers are going into overdrive, with Samsung and TSMC spending tens of billions of dollars. Arm’s strong position as a designer is a strength. But this does not make it wholly immune to a chip downturn.

Secondly, its stranglehold on the market is under threat from Risc-V, an open architecture that is gradually gaining traction. Champions include Imagination, another UK-born tech company controversially acquired by an overseas buyer.

Once restricted to lower end technology, Risc-V is now being harnessed for integrated “system on a chip” microprocessors — in which one chip is used for multiple functions. Research consultancy Semico reckons on its growth more than doubling each year through 2025. Arm’s crown is starting to slip.

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