Nvidia has scrapped plans to buy Arm from Softbank Group due to “significant regulatory challenges preventing the consummation of the transaction,” according to a joint statement that indicates Arm will proceed with plans for an IPO. In what is being positioned as a coincidence of timing, Arm says Simon Segars has resigned as CEO with Rene Haas, formerly president, stepping into the role. After being announced in September 2020, the $40 billion deal faced opposition from both the European Commission and the Federal Trade Commission, which in December sued to block the sale.

Nvidia founder and CEO Jensen Huang said Nvidia will continue to be an Arm licensee and the two companies will partner closely. Bloomberg reports that “SoftBank and Arm are entitled to keep $2 billion that Nvidia paid at signing, including a $1.25 billion breakup fee.” Presumably the other $750 million is part of the 20-year Arm licensing agreement referenced in Nvidia’s press release.

In addition to regulators, Arm customers — as well as scientist and entrepreneur Hermann Hauser, integral to the development of the early Arm processor — strongly opposed the deal.

“Arm’s value has always been its neutrality, something that SoftBank, which doesn’t compete with any of the technology’s customers, was able to maintain,” Bloomberg writes. “When Nvidia announced the deal, concerns grew that either its value would be destroyed by the change in ownership or opposition would scuttle its chances of getting signoff from governments around the world.”

In addition to the governments of the EU and U.S., the deal also needed approval from China, says Bloomberg.

The UK-based Arm licenses its microprocessor architectures to customers including Apple, Amazon, Google, Intel, Microsoft and Qualcomm. “If Nvidia stopped other companies using Arm’s chip designs in their semiconductors analysts said the implications could have been huge,” writes CNBC.

Built over three decades on the manufacture of GPUs for gaming, CAD and the like, Nvidia has recently expanded into chips for artificial intelligence and other uses, becoming what Bloomberg calls “the biggest U.S. chip company by market value.”

The scuttled deal has underscored chip tensions between the China and the U.S. The former is the biggest producer of semiconductors by volume, while the U.S.-based chip companies outpace it by revenue. “That gave the two countries divergent interests in examining the Arm acquisition,” Bloomberg writes, noting the UK was in the middle, “faced with the possibility of its most famous technology asset shifting to U.S. control.”

Dissolution of the Arm deal hasn’t had much impact on Nvidia’s stock price, which is “up more than 80 percent in the past 12 months,” per Bloomberg. The global chip shortage has made companies that produce the coveted items integral to the security economic infrastructure of their respective nations, prompting many “to think about onshoring more semiconductor design and production,” per CNBC.

Related:
SoftBank Pitches IPO for Arm After Deal with Nvidia Falls Through, The Wall Street Journal, 2/9/22
The Death of the Nvidia Arm Acquisition: Why It Happened and Who’s Affected, Windows Central, 2/8/22
The Collapse of the Nvidia Deal Leaves Arm Exposed, Wired, 2/8/22