SoftBank Group has suffered huge losses in the primary and secondary investment markets, forcing Son Masayoshi to rush to sell his trump card ARM. NVIDIA's acquisition not only made it a bargain, it may also make it the leader in the global chip industry.
Text/"Automobile Man" Zhang Heng
Nvidia's acquisition of ARM is an acquisition that has a huge impact on the development of the global semiconductor industry. Will Nvidia, which owns ARM, develop into the "ultimate boss" behind the smart car field?
On September 14, NVIDIA officially announced that it would acquire ARM, a semiconductor design company owned by SoftBank Group, for US$40 billion. For this purpose, they will pay US$21.5 billion worth of NVIDIA stock and US$12 billion in cash, of which of $2 billion will be paid immediately to sellers. In addition, there are performance-promised bonuses and equity payments to ARM employees.
Nvidia is a semiconductor company with a market value of US$300 billion and the second largest semiconductor company in the world (the first is TSMC). NVIDIA's full-year sales in 2019 were US$10.918 billion, and US$40 billion is a huge number for them. What's more, in April this year, Nvidia just acquired the Israeli cloud computing company Mellanox for US$6.9 billion.
When it comes to chips, the first things people think of are Intel, Samsung and Qualcomm. In the competition for the future semiconductor industry, TSMC, NVIDIA and ARM are in a dominant position. These three companies are from Taiwan, the United States and the United Kingdom respectively. ARM was acquired by SoftBank Group under Masayoshi Son in 2016 at a premium of more than 40% at the time, and became a company controlled by Japanese companies.
As a financial investor in ARM, SoftBank is positive about its sale, but previous negotiations have had twists and turns. The reason is that ARM, as SoftBank’s trump card, certainly wants to sell it at a good price. But judging from the results, SoftBank acquired ARM for US$32 billion in 2016 and now sells it for US$40 billion, which is basically the same range. During the same period, Nvidia's market value increased tenfold. Prior to this, the market’s valuation of ARM was around US$100 billion. Why is Son Zhengyi eager to sell at a low price?
"Autobot" previously reported on "Courting the "Nasdaq Whales", Son Masayoshi's Future Uncertain". The article described how SoftBank's Vision Fund suffered huge losses in the primary market and in order to make up for the losses After realizing the fact, Masayoshi Son then took a risk by purchasing call options in large amounts in the secondary market. However, God was not in favor. In the past few trading days, Nasdaq suddenly plummeted. Although Masayoshi Son claimed that they had closed their positions before this, it was clear that not all of them had been closed.
Successively suffering huge losses in the primary and secondary markets, Sun Zhengyi had to sell ARM at a low price to solve his immediate needs. Why else would we need US$2 billion immediately? This is life-saving money. Moreover, this transaction will be beneficial to Nvidia and have a certain positive impact on the trend of U.S. technology stocks.
Computer processor architecture can be divided into complex instruction sets and simple instruction sets. The former is dominated by Intel's X86 architecture, and the latter is dominated by the ARM architecture. ARM architecture chips are widely used in low-energy consumption embedded system designs, including familiar mobile communications fields, consumer electronics products and automotive chips, and even military equipment such as missile on-board chips. Benefiting from the rapid development of the Internet of Things era, ARM has shipped an average of more than 22 billion chips per year in the past three years, accounting for 75% of the world's 32-bit embedded processor share.
The automotive industry does not use X86 processors in the development of smart cars. In the field of autonomous driving computing, NVIDIA's own GPU chips have leading computing advantages. In addition, most of the low-power chips used in automobiles are based on the ARM architecture, and most of them have ARM patents.
ARM has also long pointed its finger at the automotive field. They know that with the development of automobile intelligence, more computing power is needed in automobiles. ARM has gained market share by offering energy-saving technology, and most companies developing automotive chips have licensed ARM processor technology. ARM has established the Autonomous Vehicle Computing Consortium (AVCC) with partners from the automotive industry to create technology standards to help accelerate the era of autonomous vehicles.
Obviously, when ARM becomes an American company, it is definitely not good news for China.
TSMC has refused to OEM for Huawei, and most chip companies such as Huawei HiSilicon use ARM-based architecture. Once the U.S. government uses an executive order to prevent ARM from licensing technology to Chinese companies, the blow to the Chinese chip industry will be Inestimable.
People may still remember that Qualcomm’s previous acquisition of NXP was stranded because it was vetoed by China, and this time Nvidia’s acquisition of ARM also needs the approval of Chinese regulatory agencies.
The founder and CEO of NVIDIA, Jen-Hsun Huang, is a Chinese-American. He was born in Taipei City, Taiwan Province, China. His ancestral home is Da'an Village, Qingtian Pass, Zhejiang Province. He speaks fluent Chinese. Huang Renxun is certainly prepared for the situation in China, and he is confident in facing the approval issues from Chinese regulatory agencies.
For the success of this transaction, the vote of Chinese regulators has become the decisive vote. Whether it is Wall Street attacking SoftBank Group in the secondary market or Nvidia acquiring ARM, we can see the strong position and foresight of the United States in the financial and chip fields. Nvidia's layout in the field of smart cars and autonomous driving has been very effective, and the acquisition of ARM will definitely make them even more powerful in the automotive field. The key question is, how do the Chinese and American governments view this acquisition? (Text/"Autobot" Zhang Heng, some pictures are from the Internet) Copyright Statement This article is an exclusive original manuscript of "Autobot", and the copyright belongs to "Autobot".
This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.