Nvidia and ARM's deal has sounded the alarm for the industry

The deal to sell ARM to Nvidia for $40 billion has caused a lot of discussion in the industry, but some of ARM's partners have remained silent.

"This is shocking news and spells trouble for many manufacturers," said Mark Lippett, chief executive of XMOS processor design in Bristol, England. "Contrary to traditional business strategy, which says companies should retain control of their strategic assets, the chip industry has been content to divest itself of its own process technology and rely on licensing from ARM."

Of course, ARM deserves credit for coming up with this as they did. However, the fact that the same IP is now in the hands of a competitor, rather than an absolutely neutral party, completely changes the outcome. Despite Nvidia’s promise to maintain its “open licensing model and customer neutrality,” business as usual seems unlikely for ARM’s largest licensee. In fact, I think this is a huge wake-up call for the entire industry.”

ARM's large semiconductor customers, including Qualcomm, Samsung and NXP, have remained silent on the matter.

Simon Seagars, Arm chief executive, said: “I have spoken to many of our partners and it is important that Arm can maintain its business model and continue to deliver on its promise to loyal licensees.”

"I think there are two areas of concern," said Graham Curren, CEO of Sondrel, Europe's largest independent chip design consultancy and a partner of ARM. "First, I agree with Hermann Hauser that some companies will struggle with the idea of ​​buying products from competitors and look elsewhere, so the current business model may change."

“Secondly, for the UK, I just hope this doesn’t turn out like every other acquisition – transfer of IP and management decisions, followed by a lack of investment and eventual closure. Almost every startup has gone this way, look at Imagination, which was without a CEO for nine months, and now DisplayLink, where almost all of its staff are inquiring about redundancy. Of course, time will tell, and this will have to be approved by regulators.”

But he said there was a potential upside. "Will this make us the largest UK state-owned enterprise in the sector?"

Others were more positive about the deal. “Under Nvidia’s management, it’s doing better than before,” said Malcom Penn, a market researcher at Future Horizons. “It’s capitalism, but it’s better than if Imagination sold to China.”

"For customers, if you outsource, you run the risk of long-term security of supply... It's a choice you make, and of course, it can always go wrong. For Nvidia, it's a smart move. It gets them from 0 to 100 in a blink of an eye, with a guaranteed licensing fee/royalty revenue stream that will keep them lucrative for years to come."

“The importance of this news to the industry cannot be overstated. The future will be determined by how companies fare in this chain of reactions. Whatever happens, this announcement has forced a major rethinking of the chip business. Wherever we go next, it will not look like what we have today.”