Nvidia – Arm and the challenges of creating a new type of technology company

Nvidia is in the process of passing regulatory approvals to buy Arm from SoftBank – a technology holding company with mixed success due to its acquisitions.

Arm had to be tied to a company that could advance it, not treat it as an investment, to ensure Arm’s future success. Nvidia needed a processor to better compete with AMD, Qualcomm and Intel, all of which have GPUs and processors, and Arm was the only ready-to-use option for sale.

This week, let’s explore this acquisition, the most significant regulatory hurdles that the effort must overcome, and what I think will result once the two companies become one.

We’ll end with my product of the week: GeForce Now from Nvidia, which is now moving from launch strategy to maintenance product.

Let’s go.

Merger problems

As mergers progress, this one is relatively simple. There is virtually no overlap between the two companies. Nvidia builds GPU-related products that they sell to third parties who build systems with them.

For example, they also build some systems, such as DGX desktops, but primarily to provide the necessary tools for developers who often need unique workstations to perform critical programming tasks.

The plan is essentially to keep Arm’s open licensing model as it is, by licensing everyone. However, Nvidia is now taking a stake in this development in a direction that benefits both entities. We will get to what I think will be the result in a moment, but let’s talk first about who might have a problem with this merger.

Only China is likely to have a major problem with this merger. Chinese companies have a significant interest in Arm technology. This reflects much of what the country does in everything from smartphones to automobiles.

China would no doubt prefer a Chinese company to make the acquisition. But it would be problematic for the rest of the world on many different levels. It is important to note, however, that China will probably be appeased by the fact that Arm China, a subsidiary of Arm, guarantees them access to technology. Export controls in the UNITED States do not extend to Arm because most of their intellectual property was created in the United Kingdom (Arm is a British technology powerhouse).

Finally, architecture licensees in China don’t have to worry because the benefits of an ISA and an architecture license, unlike chips, cannot be cut.

On the U.S. regulatory front, Qualcomm, with a growing presence in the automotive industry, wants to be assured that it will not be excluded from Arm technology. Similarly, Apple, which often has problems with an overly powerful supplier, will also want to be assured that it is not disadvantaged by the merger. But neither Qualcomm nor Apple should feel threatened, as U.S. regulators and their counterparts in China and Europe focus on preserving competition.

 

Moreover, as I have illustrated with respect to Intel and the lack of overlap between Arm and Nvidia, the agreement is exceptionally pro-competitive. The question is not whether Arm remains “independent” – the question is whether this agreement will promote competition, and clearly it will.

We always knew arm technology had potential, but Arm could only scratch the surface. Arm itself does not have the size or scope to enter new markets. But with this transaction, overnight, the Arm ecosystem will have access to new complementary technologies that will change the landscape of the Arm ecosystem.

The new administration is concerned that technology companies are gaining too much strength in the market, but given that Arm and Nvidia are so different, I doubt these concerns will be difficult to resolve in this case.

Today, Arm is too thin to compete with x86 in PC and data center spaces. Arm alone does not have the resources to create an ecosystem in the mobile, PC, data center, automotive and embedded markets. The task is too big and Arm can’t do it alone. Therefore, I do not see any serious problem in preventing this agreement; other successful mergers such as Dell and EMC, Sprint and T-Mobile have been much more difficult and complex, but they are successful.

The result

Once the merger is approved, Nvidia will better merge Arm technology with Nvidia’s GPU efforts. The combined entity will be free to explore the limits of what this could mean for Nvidia’s automotive, AI, personal computer, robotics and IoT efforts. Because the same mix of SoC (chip-based system) occurs throughout the ecosystem, this will accelerate trends already being driven by AMD, Intel and Qualcomm.

Nvidia’s comments on the merger suggest that they will also begin to consider licensing their GPU technology through Arm’s channels. Along with licensing, there is an even greater opportunity for innovation, as licensees are free to explore the limitations imposed by the licensing of this technology and not by the physical equipment they could typically purchase at Nvidia.

Licensing will enable all Arm licensees in multiple markets to innovate and create new technologies. This is where this agreement is so powerful for the Arm ecosystem – it will allow all Arm licensees to take advantage of the technology that Nvidia and Arm can provide together.

Platforms for the future

Once the technology is combined, expect Nvidia to create the next generation of AI brains combining GPU and Arm CPU technology in different ways to meet Nvidia’s growth strategies. The most interesting parts of these efforts are associated with autonomous vehicles, robots and drones. I anticipate that Nvidia will develop a generic autonomous brain where these basic technological elements can be multiplied, improved, advanced and concentrated in these different markets and the price levels within them.

For example, imagine a SoC family targeting a range of robots ranging from recreation to surgery. These products would be fully compliant with each of the targeted market regulations. Because of economies of scale, they should provide a cheaper and more competent alternative to the more ad hoc solutions that generally exist on the market today.

I expect significant potential for some emerging markets whose costs are currently limited, such as robotic pets and robotic aids for customers with disabilities. In short, once done, this should significantly advance the introduction of affordable personal robotics while allowing intelligence to be much more common in more and more product areas such as health, safety and devices.

pack

The Nvidia-Arm merger should be relatively easy to achieve compared to many of the complex mergers we have seen completed over the past decade. Yes, China will have problems that need to be resolved, but the growth of a global armed ecosystem will benefit China. The current U.S. administration’s concerns that technology companies are becoming too powerful will no doubt require some minor concessions, but they should be approved.

The end result should be a set of lower-cost, higher-capacity AI offerings that could cover all smart categories, from cars to cities; including personal robotics. Even flying cars and jet packs will likely eventually benefit from more affordable and more capable packaged AI.

Nvidia’s acquisition of Arm could very well be the beginning of the great pivot of our autonomous robotic future.

GeForce now

Cloud computing is the future of work and one of the indicators of cloud computing efficiency is Nvidia’s GeForce Now service.

Last week, Nvidia announced that it was going from introductory pricing to maintenance pricing for new subscribers to the service at $9.99, but that it kept the monthly fee for first users indefinitely at $4.99. This continuous entry price is an excellent nod to the first users of this technology who experienced the problems of starting the service as it progressed to complete production, and I would like this practice to be much more common.

This service has been beneficial for those who wish to play the Cyberpunk 2077 property, which works so badly on game consoles, guaranteeing better on the backend as this awesome game unfolds as advertised.

The advantage of a cloud game service is that the hardware, patches and experience are all largely managed, in this case, by Nvidia; making sure you can sit back and play the game. You need a high bandwidth and low latency connection. But with that, you can even play on a Chromebook, if you like.

Now, if you can play from the cloud, where latency and graphics performance are essential, you can also work from the cloud; which makes this service an indicator of the world of cloud PCs in which we will probably all live by 2030.

Because they took care of their founding players properly, and because cloud gaming represents the future of personal computing, the Nvidia GeForce Now service is my product of the week.

 

Leave a Reply