|This file photo taken on July 28, 2016, shows SoftBank CEO Masayoshi Son speaking at a press conference in Tokyo. SoftBank said Monday it is selling Arm to NVIDIA for $40 billion. AFP-Yonhap|
By Baek Byung-yeul
While Nvidia agreed with SoftBank to acquire the latter's chip-design company Arm for $40 billion, industry analysts said Tuesday it remains to be seen whether the U.S. graphic chip giant can smoothly obtain "regulatory approvals" from fair trade bodies in strong semiconductor industry countries especially China, which controls Arm's Chinese subsidiary.
In this kind of merger and acquisition (M&A) deal, in which many different interests are involved and clashed, suitors could hit a hurdle in their acquisition process because their deals could completely overturn the industry's outlook, they added.
In a press statement, Nvidia said "the proposed transaction is subject to customary closing conditions, including the receipt of regulatory approvals for the U.K., China, the European Union and the United States," adding completion of the transaction is expected to take about 18 months.
Given the complex nature of Arm's shareholding structure, in which the Chinese government owns a 51 percent stake in Arm China, industry analysts said the acquisition process could be extended over the projected 18 months.
Since the outbreak of the trade dispute between the U.S. and China, the IT industry has become a battle ground between the two economic superpowers. China has hit a snag with its plan to become a leader in semiconductor and display sectors as the U.S. government has tightened its sanction, restricting the direct or indirect use of its technology by a Chinese tech firm Huawei.
"To close the deal, Nvidia needs to receive regulatory approvals from the U.K., the U.S., China and the EU. But chances look slim that either China or the U.K. would grant their approvals," said Lee Seung-woo, an analyst at Eugene Investment and Securities. "It won't be easy for the U.K. government to grant an approval considering its relationship with the U.S. Due to the relationship between the U.S. and China, chances are also slim that China would hand over the permission, too."
As the U.K. chip-design firm will become a part of the U.S. company, they further noted that the completion of the deal could take longer, citing previous examples that suitors had to give up their targets after failing to pass through the regulatory approval process.
"For instance, Qualcomm tried to acquire NXP Semiconductors for $44 billion, but the U.S. chip company had to give up on buying the Dutch automotive chip maker because the deal had been on hold for almost two years as the Chinese government allegedly refused to grant a regulatory approval," an industry official said.
Applied Materials, a U.S.-based global leader in the semiconductor equipment market, also scrapped its plan to acquire Tokyo Electron, Japan-based world No.3 chip manufacturing equipment maker, because of regulatory concerns.
|In this file photo taken on June 23, a woman walks past a SoftBank telecommunications store on a street in Tokyo. AFP-Yonhap|
Scott Foster, an analyst at Lightstream Research, wrote on a Hong Kong-based newspaper the Asia Times that it remains unclear how American ownership will affect Arm's relationship with China.
"And it remains to be seen whether or not Chinese regulatory approval of the deal will be contingent upon changes in American policy toward China," the analyst said.
Ma Jihua, a telecom analyst, also said it will be difficult for Nvidia to obtain regulatory approval from the Chinese government. "The acquisition will affect the development path of China's chipset industry as most of its products are based on Arm architecture."
For Samsung Electronics, which has appeared as one of the possible buyers of Arm or to become a part of a consortium for purchasing the U.K. firm, Arm being acquired by Nvidia would provide another opportunity to the Korean company in terms of expanding partnership.
Under the deal, Nvidia said SoftBank will remain committed to Arm's long-term success through its ownership stake in Nvidia, expected to be under 10 percent.
Established in 1990 in the U.K., Arm is a global leader in mobile chip architecture design that generates profit by licensing its intellectual property to tech giants including Samsung Electronics, Apple and Qualcomm.
As a subsidiary of Nvidia, Arm will continue to operate its open-licensing business model while maintaining global customer neutrality. Arm is also expected to benefit from both companies' offerings, including Nvidia's numerous innovations, Nvidia said in a statement.