Nvidia acquires Arm from Softbank
Open ISA, 'RISC-V' attracts attention as an alternative
Arm business expected to remain intact until M&A completion


2020 was a year with many mergers and acquisitions (M&A) transactions between semiconductor companies, following 2015.

Analog Devices (ADI), the second largest semiconductor company in the analog industry, acquired and merged with Maxim Integrated, the seventh largest company in the same industry, in July. In October, SK Hynix acquired Intel’s storage and NAND flash division, and Marvell, which focuses on network semiconductors, acquired and merged with its competitor Inphi. In addition, CPU company AMD acquired and merged with FPGA company Xilinx.

Among them, the transaction that received the most attention was the acquisition and merger of Arm by NVIDIA in September. NVIDIA is a GPU company that surpassed Intel in July 2020 to become the largest semiconductor company in the United States in terms of market capitalization, and Arm is a company that designs low-power semiconductor IP cores and sells them to other companies through licenses. Its representative product is the 'Cortex' product line, which is used as a smartphone or IoT core.

The amount that Nvidia will pay SoftBank to acquire and merge Arm is $40 billion, which is $8 billion more than the $32 billion SoftBank paid to acquire and merge Arm in 2016. If approved by the relevant authorities, the deal is expected to be the largest semiconductor M&A in history. The reason the M&A amount has risen to this level is because Arm's influence in the semiconductor industry is enormous.

◇ Arm becomes a subsidiary of NVIDIA, so nothing will change?

Arm does not manufacture or design semiconductors directly, but licenses its 'Arm architecture', an instruction set architecture (ISA) based on a reduced instruction set computer (RISC), to other companies.

Founded in 1990 as a joint venture between Acorn, Apple, and VLSI (now NXP), Arm has established itself as the implicit standard in the RISC ISA field by providing the Arm architecture without any vendor discrimination.

RISC ISA was proposed in 1980 to complement the shortcomings of Complex Instruction Set Computer (CISC) ISA, represented by x86, which is difficult to optimize because each instruction length is different, and has continued to develop to this day.

The low-power-based Arm architecture has been gaining recognition since 2010, when it was adopted for smartphone APs (Application Processors). Arm announced in November that it has shipped approximately 100 billion semiconductors based on its architecture over the past five years, and that they are widely adopted in IoT and wearable devices.

As it is in a de facto standard position, when Arm came to the market, the semiconductor industry was very interested in which company would acquire it. When Nvidia was decided as the new owner, some raised concerns that Nvidia might restrict the provision of Arm's intellectual property (IP) to other companies.

In response, NVIDIA CEO Jensen Huang drew a line in public concern, saying, “NVIDIA will maintain the existing Arm business.” If NVIDIA causes price increases and supply and demand instability for Arm IP, it will only increase companies’ vigilance, and only competitors such as RISC-V (RISC-Five) will grow.

◇ RISC-V has potential, but needs an ecosystem

The RISC-V architecture, an open RISC-based ISA, is considered a potential competitor to the Arm architecture. The RISC-V project was started in 2010 at UC Berkeley by Professor Krste Asanović and then-PhD students Yunseop Lee and Andrew Waterman.

In 2016, when Arm was acquired and merged with Softbank, the RISC-V Foundation was officially launched with support from around 60 companies. It has now changed its name to RISC-V International and moved its headquarters to Switzerland, and has around 500 member companies registered, including SiFive, Western Digital, Andes Technology, and Alibaba Cloud.

Arm's main sources of revenue are IP licensing, royalties, and custom semiconductor design. If an Arm member company wants to modify and apply Arm IP to design and manufacture semiconductors for their own product purpose, they have to obtain a separate, expensive additional license. The RISC-V architecture does not need to do so. The ISA designed is open and free to use under the Berkeley open source license.

The RISC-V architecture is not yet a complete ISA. There are many IP libraries that need to be added and improved. For the RISC-V project to be successful, it is important to create an application ecosystem that uses the ISA beyond the completeness of the ISA itself.

At the RISC-V Summit 2020 held online last December, Seagate announced that it had designed and started manufacturing two processors based on the RISC-V architecture. This suggests two things. First, the commercialization potential of the RISC-V architecture is very high.

Second, due to compatibility issues with existing systems where the Arm architecture is mainstream, semiconductors adopting the RISC-V architecture are still only used to control embedded devices.

◇ Arm Vs. RISC-V, M&A not fully in full swing until completed

Although it still has the weakness of an insufficient application ecosystem, the RISC-V architecture has a cost advantage because it is an open ISA. To expand its reach, Arm introduced a contract model called Flexible Access in July 2019.

Flexible Access, a contract model that allows access to more than 75% of the Arm IP portfolio, support, tools, and training resources without up-front licensing purchases, is being used by companies such as Nordic, Faraday, Socionext, Artmoji, and Hailo, as well as organizations such as the Ministry of SMEs and Startups in Korea.

In May, it also introduced Flexible Access, which is exclusive to startups with funding of up to $5 million, and in November, it announced that Ethos-U NPU and Cortex-M MCU IPs with enhanced AI performance would be included in Flexible Access as soon as they are released to address the increasing demand for edge AI processing.

As Nvidia has decided to maintain its existing Arm business, the market share of Arm and RISC-V architectures is expected to remain at the current level. Nvidia, which cannot help but watch the semiconductor industry and regulators until the second quarter of 2022, when the M&A work is expected to be completed, is currently unlikely to pull out the card of raising the price of Arm IP and restricting supply.

However, it is still unknown whether China, which has already suffered a major blow to the semiconductor industry under US sanctions, will approve the acquisition and merger of Arm by US company Nvidia.