To Avenge U.S. Sanctions against Huawei
China is likely to oppose U.S. GPU giant Nvidia’s acquisition of ARM of the United Kingdom, the world's largest semiconductor design company as it seeks to retaliate against U.S. export embargo against Huawei.
Chances are growing that Chinese authorities will not approve Nvidia’s acquisition of ARM for US$40 billion. The United Kingdom where ARM is headquartered is reportedly also negative about the M&A deal.
"In 2016, Qualcomm attempted to acquire NXP for US$47 billion but failed due to China's refusal to approve it," said an analyst at Eugene Investment & Securities. "Because strategic interests between countries and businesses are very complicated due to the nature of the semiconductor industry, it will be a rough road to closing the deal, I think."
The United States and China clashed in the past over large-scale semiconductor M&As. In October 2016, Qualcomm, a U.S. fabless company, tried to acquire Dutch automotive chip company NXP for $47 billion, but failed due to opposition from China. In November 2017, Singapore's Broadcom was close to acquiring Qualcomm for $117 billion in a hostile M&A bid, but the deal fell through due to opposition from the Committee on Foreign Investment in the United States (CFIUS) under the U.S. Treasury Department.
Industry watchers say that Chinese semiconductor companies will accelerate their moves to sever business ties with ARM. If ARM becomes a U.S. company after it is acquired by Nvidia, ARM may join the U.S. sanctions against China and not hand over the design of the smartphone application processors (APs) to Chinese companies. Some experts point out that Chinese companies may take preemptive measures to cut ties with ARM. In this case, it is predicted that Chinese semiconductor manufacturers will use open source technology such as RISC-V as an alternative.
However, the problem is that Chinese fabless companies have a low technological level. Huawei's semiconductor design subsidiary HiSilicon has also been making Kirin chips based on ARM's design. "It seems very difficult for Chinese companies to make their own high-performance APs without ARM's design technology," an industry analyst said.