ARMs war risk between China and the US amid tech race

Nvidia’s US$40 billion bid for ARM looks certain to increase tension between Washington and Beijing

A US$40 billion takeover of the high-tech ARM group will threaten the ambitions of China’s technology industry.

Plans by American semiconductor specialist Nvidia to buy the British company from Japan’s Softbank could block Chinese firms from using its chip designs.

Hundreds of companies license ARM technology, including Apple, Samsung, Qualcomm and Huawei, which is embroiled in the New Cold War between the United States and China. To date, about 180 billion chips have been manufactured using ARM “solutions,” according to the group.

“ARM Holdings doesn’t build processors per se,” Jason Perlow, a technical architect consultant at Dimension Data, told ZDNet, a business technology news website published by CBS Interactive and TechRepublic.

“It creates reference designs or ‘architectures’ which are essentially the basic blueprints, or the ‘DNA,’ of how semiconductors work,” he added. “[The firm] then licenses those basic designs to other companies, which in turn use them in their own chips.”

AI development

ARM tech is at the center of everyday items such as smartphones, tablets and integrated database circuits. It also plays a key role in the development of AI, which will drive the Internet of Things concept.

In turn, this is crucial to President Xi Jinping’s “Made in China 2025” policy, which has been ramped up as Washington’s technology row with Beijing starts to byte.

The chip conflict has already eroded Huawei’s competitive grip on 5G and smartphones as the US ban tightens on tech exports.

“AI is the most powerful technology force of our time and has launched a new wave of computing,” Nvidia CEO Jensen Huang said in a statement, referring to the ARM deal that would create “the premier computing company for the age” of artificial intelligence.

“In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today’s internet-of-people. Our combination will create a company fabulously positioned for the age of AI,” he added.

Still, Nvidia will need to get regulatory approval in the United Kingdom, the US, the European Union and China, where a joint-venture with ARM was set up by owner Softbank.

Business model

Hermann Hauser, the co-founder of the Cambridge-based company, described the takeover on Monday as an “absolute disaster” and pointed out that it would destroy the company’s independent business model.

Indeed, major players have lobbied the British government to intervene and bring ARM back under UK ownership, the BBC reported.

“An acquisition by Nvidia would be detrimental to ARM and its ecosystem,” Geoff Blaber, the vice-president of research for the Americas with CCS Insights, told the broadcaster, adding that a deal “would rightly face huge opposition” from the group’s customers.

“Independence is critical to the ongoing success of ARM and once that is compromised, its value will start to erode,” he said.