Arm says growth threatened by opposition to NVIDIA takeover

Cambridge superchip architect Arm has warned the UK government that rejecting NVIDIA’s multi billion dollar bid for the enterprise could cripple the business and stifle both its ability to invest in growth and the health of the local and national economies.

CEO Simon Segars says Arm has ruled out the alternative strategy of an IPO for the same reason – that it would not provide the resources needed to grow the business in a meaningful manner.

Arm and NVIDIA were asked for their views by the UK’s Competition and Markets Authority (CMA) and this week ripped alternative growth blueprints to shreds.

Segars warns: “We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast and innovate.”

The invest-or-shrink response from the main players gives the UK government a genuine headache as it contemplates whether to back or veto the deal. Authorities in Europe, the US and China are all said to be opposed to NVIDIA’s swoop for Arm.

In their response to the CMA, NVIDIA says a competition threat to fellow chipmakers will not materialise. It says it will not bar Arm competitors’ access to Arm IP.

The two companies go even further – suggesting that simply spinning off Arm from Japanese parent SoftBank would leave a severed enterprise incapable of making sufficient R & D investments to ensure the future viability of the business.

While the bidding price was originally quoted at $40 billion, Business Weekly understands this has now doubled. Also, NVIDIA could end up paying triple the bigger amount in the form of investments into new technology plays in the Cambridge cluster.

It is already bankrolling a first-of-breed supercomputer with Arm and AstraZeneca, housed at Kao Data Centre in Harlow, to fuel groundbreaking advances in hi-tech and life sciences.

Arm and NVIDIA have also warned the CMA that the longer it delays a decision the more damage will be done to a takeover move and unprecedented tech investment in the UK.

The potential partners add that their deal is not a threat but that the power of rivals including Intel is where the real menace lies.

And they argue that “the move will materially change Arm’s incentives and opportunities. In contrast to a standalone Arm, the merged entity would have every incentive and the ability to dramatically increase investment in Arm R & D across the board, rather than facing the difficult choices of where to de-invest and face further customer and competitive pressures.”

It is a clear: ‘We shrink and you let our competitors grow’ warning from Arm in particular.