Two days ago Nvidia – a large US company that designs processors and graphics cards for computers – bought Arm Holdings for 40 billion dollars (just under 34 billion euros), a company born in the United Kingdom from which the vast majority of microchips mounted on smartphones, tablets and other smart objects, such as new generation televisions, depend. Nvidia bought Arm Holdings from SoftBank, a Japanese tech conglomerate for some time in economic difficulty, which had acquired Arm in 2016 for $ 32 billion. Nvidia is already one of the most important microchip manufacturers in the world and with the acquisition of Arm it could put its bigger competitors, such as Intel, in difficulty.
What is Arm
Arm is a company founded in Cambridge in 1990 and born from a collaboration between Apple and Acorn Computers, a failed computer manufacturer in 2000 (Arm stands for “Acorn RISC Machine”). Arm has a particular business model: it does not directly manufacture microprocessors nor – in most cases – design microchips, but it licenses the intellectual property that other companies need to design and build architectural microchips (i.e. criteria based on which a processor is designed and built) Arm.
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Processors with Arm architecture (which from here on we will call Arm processors) consume less energy than those of other rival companies, and for this reason they are used in about 90 percent of smartphones, according to the Wall Street Journal. All iPhones and iPads use Apple-designed processors with Arm architecture, most Android phones have Arm processors designed by American Qualcomm, and Samsung and Huawei also design their processors based on the same architecture. Smart TVs and most connected gadgets, such as smartwatches and smart home accessories, also have Arm processors.
Why Arm is important
In recent years, with the spread of smartphones and other smart devices, the importance of Arm has grown considerably, albeit limited to the so-called sector “mobile”. The world of microprocessors, until now, has been divided into two: on the one hand Intel (and to a lesser extent Amd), which produce processors with x86 architecture and which dominate the world of computers, both fixed and portable; on the other Arm that dominates the furniture world.
This division – Intel on computers and Arm on smartphones – lasted for years and is justified by various reasons, including structural ones. The Windows operating system, for example, is optimized for x86 processors, and until recently those who tried to build a computer with an Arm processor had serious problems because most of the programs did not work or did not work.
That changed last June, after Apple announced that it will stop using Intel-made processors on its computers to switch to in-house Arm architecture processors over the next two years, and will rewrite its macOS operating system to accommodate the new architecture. . The new processors with Arm architecture, which are called Apple Silicon, according to Apple should be as powerful as the old ones but guarantee a much longer battery life, as well as other advantages. The first computer with Apple Silicon should be out later this year.
After Apple's choice, other computer manufacturers have begun to migrate to Arm, or have accelerated migration processes already underway. Both Microsoft and Samsung, for example, have already launched laptops with Arm processors on the market, and Microsoft is still perfecting a version of Windows made specifically for Arm.
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This does not mean that all computers will change the processor architecture and that Intel will be put out of business: the US company is already developing new microchips and has many important resources. For example, it is one of the very few in the world to have the technology and capabilities to produce the latest generation chips. But Intel's market shares in the computer industry will likely drop in the next few years, analysts say.
There is a question of Antitrust
With its business model, Arm has always been considered a neutral company, which licensed its intellectual property to all without distinction, according to a corporate doctrine called “A Shared Purpose”. Its previous owner, SoftBank, had no interest in the microchip market and maintained the same policy. But Nvidia, the new owner, is already a processor manufacturer, albeit of a different type, and there is a risk that it will use Arm to give its businesses an edge. Jensen Huang, the chief executive of Nvidia, has promised that he will maintain Arm's neutrality but, as the New York Times writes, the acquisition is likely to attract the attention of antitrust authorities around the world.
There is also a question of geopolitics
The processor sector is strategic and is subject to competition between the United States and China. For now, the former control the most important technologies and, thanks to Intel factories, host one of the few companies in the world capable of producing the latest generation processors: the others are Samsung in South Korea and Tsmc in Taiwan. China has been trying for decades to develop a local microprocessor industry, but for now the results have been disappointing, even if in recent times the government has significantly increased investments and renewed its strategies.
Up until now, Arm was Japanese-owned and had continued to do business with companies around the world, including Chinese ones like Huawei. But if Arm were to become part of an American company like Nvidia, the government could ban it from doing business with Huawei, as is already the case with other tech companies. In the Global Times, an English-language tabloid owned by the Chinese government that usually voices tough positions, an article came out that with the merger between Nvidia and Arm “the Chinese semiconductor industry would risk being controlled by United States”. The article asks the Antitrust authorities to block the acquisition.
