They say that politics, and certainly that of the geo-political variety, weaves itself into every walk of life. Well, it seems that this is no more true than in the major announcement the other week of the possible US$40 billion acquisition of Arm by Nvidia. It probably doesn’t take a tech genius nor economics whizz to figure out how far-reaching the implications of this could potentially be.
Put simply, set against the backdrop of US-China tensions, amongst other global challenges, news of this deal has not just piqued the interest of specialist technology journalists, but has quickly sparked the imaginations of global commentators, broadcasters, and consumers alike.
What we know
Nvidia’s co-founder Jensen Huang clearly sees the extended value in the potential deal, which would be the semiconductor industry’s largest ever. As quoted in China Daily, he said, “It’s a company with reach that’s unlike any company in the history of technology.” Quite a statement. He went on to say, “We’re uniting Nvidia’s leading AI computing with Arm’s vast ecosystem.”
Nevertheless, while most press reports have characterized the sale of Arm as a done deal, in practice it faces a regulatory approval process that could takes up to 18 months. Notably, this means that the acquisition will be scutinized by both China and the US, and by the UK and the EU.
China perspective: done deal, or not?
While much has already been written about this potential deal, perhaps it would be interesting here to look at some of its possible implications from a China standpoint? On that basis, things may not be quite as clear as has been reported so far. According to many China watchers, Beijing’s main concern is the risk of Arm technology coming under US export control regulations.
Experts agree that this is bound to raise quite a few regulatory, anti-trust eyebrows, and that regulatory approvals may well prove challenging. Nvidia’s Huang said his team “fully expect to spend time with the regulatory bodies in China,” but have every confidence in getting approval for the takeover.
As reported in state-owned newspaper Global Times, the “neutrality” is in serious doubt as Arm will become part of a US firm, which means the incumbent Trump administration could try and further contain China’s growing chipset industry from the design side, following its crackdown on Huawei.
Huawei’s Kunpeng, Kirin and Ascend chips are all based on Arm architecture. “If the US prohibits Arm from cooperating with Huawei, the design of Huawei chips will be temporarily suspended,” said Huang Haifeng, an independent semiconductor industry observer.
Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, told Global Times that the Chinese government is likely to play a role in reviewing the case and the chance of its approval is low. “Regardless of whether the US government stands behind the purchase, its impact on China’s semiconductor industry is not something we want to see in the future,” said Xiang.
The ripple effect of the acquisition will prompt Chinese firms to seek alternative solutions, analysts said.
Further, it seems that China’s chip industry has urged Beijing to investigate Nvidia’s $40 billion takeover of Arm, warning that the deal will hand the US control over key technology used in almost all mobile phone chips, reported the Financial Times.
Zhu Jing, the vice-chairman of the Beijing Semiconductor Association, said a US company could not be trusted with ownership of Arm, whose energy-efficient chip designs are used in 95% of the chips designed in China. “Look at how the US is treating Huawei. If Arm is acquired by a US company, everyone will be worried,” Zhu told The Paper, another Chinese state-owned newspaper.
Global Times also urged Beijing to intervene. “The possibility that Arm could be politicized as a US technology weapon against China’s technology companies must be taken seriously,” the editorial warned.
Meanwhile, as reported in South China Morning Post, Ni Guangnan, the former chief engineer of Chinese computer giant Lenovo, said, “I believe the Chinese commerce ministry will reject the acquisition, adding that “China would not be comfortable using the Arm chip architecture if it were owned by a US company”.
Done deal? Not quite yet.