Nvidia agreed a deal to acquire Arm from SoftBank Group for $40 billion, as the US-based chipmaker moves into the mobile semiconductor sector.

The deal does not include Arm’s IoT services unit and will require regulatory approvals from the UK, European Union, US and China, which Nvidia expects to take about 18 months.

In a statement, Nvidia stressed Arm would remain independent and it would maintain the UK-based chip design businesses’ open licensing model while expanding its IP portfolio with its own technology.

The chipmaker also plans to expand Arm’s R&D presence in the UK by establishing an AI research and education centre and building a related supercomputer based on the pair’s technology.

Nvidia plans to cover $21.5 billion in common stock with $12 billion in cash. Additionally, SoftBank may receive up to $5 billion in cash or common stock under an earn-out clause, subject to Arm satisfying specific financial targets. Nvidia will also issue $1.5 billion in equity to Arm employees.

SoftBank said it will remain committed to Arm’s long-term success as a significant strategic shareholder, with its stake expected to fall to less than 10 per cent.

Wider portfolio
Nvidia founder and CEO Jensen Huang said uniting its AI computing capabilities with Arm’s vast ecosystem would “advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IoT, and expand AI computing to every corner of the globe”.

“For Arm’s ecosystem, the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with Nvidia’s GPU and AI technology.”

In a research note, Jefferies equity analyst Atul Goyal noted the deal would face regulatory challenges because of the wide range of companies using Arm’s designs. The company counts Apple, Qualcomm, Samsung and Intel among its customers, and its CPUs feature in most smartphones in production, he explained.

CCS Insight VP of research for the Americas Geoff Blaber expressed concern over Arm’s independence, tweeting it was difficult to see how Nvidia can balance its own requirements with Arm’s ecosystem: “This will face big opposition not least from Arm licensees”.

Nvidia was swift to express interest in acquiring Arm after SoftBank stated it was considering a sale of some, or all, of its stake as part of a broader asset sale strategy to tackle debt.

In August, Arm backtracked on a plan to transfer its IoT operations to SoftBank, opting instead to separate the operation and accounting from its core semiconductor business.

SoftBank acquired the chip design company in September 2016 for $32 billion.