SoftBank said to near a deal to sell British chip designer Arm

[LONDON] SoftBank is near a deal to sell British chip designer Arm to Nvidia, two people briefed on the matter said Saturday, which would raise billions for the Japanese technology investor and create a powerhouse in the semiconductor industry.

The two sides are close to an agreement for a cash-and-stock transaction whose price could potentially be more than US$40 billion, these people said. A deal could be announced within days, though these people cautioned that final details have yet to be ironed out, and the talks could still fall apart.

A transaction - which would be one of the biggest announced so far this year - could also raise concerns from antitrust regulators around the world and from customers of Arm's chip designs, which drive the majority of the world's smartphones, including the iPhone.

Nvidia is one of the world's biggest computer chip companies, specialising in powerful chips that are used for computer graphics, data centres, cars and artificial intelligence. As of Friday, its market value was more than US$300 billion - nearly US$100 billion above that of Intel, the longtime standard-bearer in chip technology - and its stock has been one of the best performers of any technology company this year.

Should the two sides strike a deal for Arm, it would net billions for SoftBank as it seeks to sell assets as part of a business turnaround. It had paid US$32 billion for Arm in 2016, as an audacious bet by its chief, Masayoshi Son, on a global rise in internet-connected devices.

In announcing that deal, Mr Son described the so-called Internet of Things as shaping up to be "the biggest paradigm shift in human history", a phenomenon he was willing to bet big on. That explained the steep price it paid for Arm - 43 per cent higher than where Arm had traded the week before the deal.

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Arm has an unusual business model: It doesn't sell semiconductors itself, and instead supplies design information that other companies incorporate into chips, charging royalties on its specifications. The company reported receiving licensing fees on more than 22 billion units sold in 2019, and its customers include Apple, Samsung, Qualcomm and Huawei.

Its technology is also beginning to play a significant role in data centres, largely through Amazon's enormous cloud division but also through an array of startups.

Its customers and government authorities are likely to press for assurances that Nvidia will let Arm continue delivering products without giving its own chips unfair advantages, analysts and industry executives say. Otherwise, those customers could gradually shift to alternative chip technology, threatening the potential revenues Nvidia hopes to reap.

SoftBank's deal in July 2016 for Arm, and its ambitions, were par for the course for Mr Son. Months later, he unveiled SoftBank's US$100 billion Vision Fund, which was tasked with buying stakes in promising startups across the tech landscape, from Uber to WeWork to a company that used robots to make pizzas.

But those bets have not quite played out the way he has expected.

The Vision Fund later drew criticism for paying top dollar for sometimes questionable startups, contributing to a nearly US$13 billion annual loss for SoftBank in the fiscal year that ended March 31. (The conglomerate said that the Vision fund has since returned to profitability as of June.) And Arm has not quite turned out to be the home run that SoftBank had expected, with relatively stagnant sales growth and an inability to take a significant share in the market for internet-connected devices.

SoftBank began months ago to explore a potential sale or initial public offering for Arm, drawing the interest of Nvidia. Last month, Arm called off a plan to spin off two related businesses to SoftBank, a decision that made it more attractive to potential buyers.

NYTIMES