In September 2020, Nvidia announced its intention to buy Arm, the license holder for the CPU technology that powers the vast majority of mobile and high-powered embedded systems around the world.
Nvidia’s proposed deal would acquire Arm from Japanese conglomerate SoftBank for $40 billion—a number which is difficult to put into perspective. Forty billion dollars would represent one of the largest tech acquisitions of all time, but 40 Instagrams or so doesn’t seem like that much to pay for control of the architecture supporting every well-known smartphone in the world, plus a staggering array of embedded controllers, network routers, automobiles, and other devices.
Today’s Arm doesn’t sell hardware
Arm’s business model is fairly unusual in the hardware space, particularly from a consumer or small business perspective. Arm’s customers—including hardware giants such as Apple, Qualcomm, and Samsung—aren’t buying CPUs the way you’d buy an Intel Xeon or AMD Ryzen. Instead, they’re purchasing the license to design and/or manufacture CPUs based on Arm’s intellectual property. This typically means selecting one or more reference core designs, putting several of them in one system on chip (SoC), and tying them all together with the necessary cache and other peripherals.
Arm has multiple licensing models for differently sized customers, with various amounts of permission (or lack of permission) to innovate upon their original reference designs. How much it costs to buy one of those licenses—up front or per manufactured device—is a confidential question we’ve asked many vendors, with no hard answers.
What does buying Arm get you, exactly?
If Nvidia acquires Arm, the first and most obvious benefit is the design company’s licensing revenue stream—and it wouldn’t need to pay IP licensing fees itself. This, however, is probably the least important facet of the deal.
Owning Arm outright would also allow Nvidia much greater leeway to innovate upon the design. We’ve spoken to several vendors who described the sort of innovation that the RISC-V architecture allows as effectively impossible with Arm; the vendors have said “they just won’t let you” make changes, like adjustments to the instruction set.