NVIDIA, ARM, two chip giants want to merge: the impact on China’s technology industry is beyond imagination

A big event happened in the science and technology industry and quickly made the headlines of the mainstream media.NVIDIA, a well-known graphics processing chip (GPU) company in the United States, announced the acquisition of the world-famous chip technology company ARM at a valuation of US$40 billion.The largest transaction in the history of the semiconductor industry was successful. A semiconductor chip giant was born! This will have a huge impact on the entire IT industry, and it will also have a huge potential impact on China’s technology industry.

NVIDIA, ARM, two chip giants want to merge: the impact on China's technology industry is beyond imagination 1

business background

Let’s briefly describe the industry pattern of chips. Let me first introduce NVIDIA. NVIDIA is the inventor of GPU (graphics processing unit) and the leader of artificial intelligence computing. It has always been the leader of GPU (graphics processing unit).

But in the past few years, they have rapidly made efforts in core technology industries such as artificial intelligence, data centers, and cloud computing. His CEO Huang Renxun is a Chinese American who is known as Superman in Silicon Valley. There are many legendary stories behind his success.

The amazing thing is that NVIDIA has undergone rapid development in recent years, especially in the past few years, with the rapid development of artificial intelligence and its wide application in various fields, making NVIDIA’s chips directly challenge the big brother Intel in the field of graphics processing. .

NVIDIA’s GPU products are so powerful that someone actually cooked an egg with the heat from their early products.

After years of development, NVIDIA has surpassed the former absolute boss of semiconductor chips in terms of market value, Intel, and has become the most highly valued company among semiconductor chip companies. Its development momentum is super fast, and the stock has risen 18 times in 5 years.

NVIDIA, ARM, two chip giants want to merge: the impact on China's technology industry is beyond imagination 2

NVIDIA stock price changes over the years Source: Yahoo Finance

On the other hand, ARM is a very weird company. ARM originated in Cambridge, England, and adopted a technology called “Reduced Instruction Set Computer (RISC)” from the University of Berkeley in the United States. However, as a chip technology company, ARM has never sold chips. For others, there is no production plant of its own.

He authorized his own chip core architecture property rights to “partners” in the industry to develop related processors and related systems.

ARM licenses are roughly divided into two types. One is architecture (instruction set) authorization; the other is micro-architectural authorization

ARM’s income mainly depends on licensing fees (License) and royalties (Royalty). Many devices in Samsung’s Apple mobile phones and tablets, as well as almost all devices produced by Qualcomm, contain ARM’s core technology.

ARM’s technology is so powerful and energy-saving that it has their technology in 95% of today’s smart phones, and its technology is also on the edge of Internet of Things (IOT) devices, automobiles, home appliances, sensors, digital cameras, and drones. Computing and other industries have been widely used.

Here is a small story. One day when their engineers discovered that their chip (the product was called ARM1) was not connected to the power supply, it was running normally! The researchers soon discovered that the chip was driven by the leakage current on the iron frame of the computer, allowing it to maintain normal operation!

Japan’s SoftBank acquired ARM in 2016 at a valuation of US$32 billion. The president of SoftBank, Sun Zhengyi, once vowed to use ARM to fully enter the Internet of Things (IOT), 5G and other mobile communications and artificial intelligence industries.

But this effort does not seem to be very successful. If ARM’s selling price today is 40 billion U.S. dollars, it will get about 1, 25 times the return on investment in 4 years. From the perspective of return on investment, the original acquisition of ARM is indeed not a successful transaction.

Softbank CEO Sun Zhengyi here also has to briefly mention Intel, a giant company that has monopolized the semiconductor chip industry for 40 years. Intel’s core technology is derived from its X86 system. It goes without saying that Intel’s technology spreads across various industries, especially in the past. The unique music and the slogan “Intel Inside” have made Intel a household name. Intel has strong CPU capabilities.

But since the wireless mobile phone communication industry has flourished, ARM has penetrated into every mobile phone communication terminal and edge computing industry with its unique technology and business model, because of its powerful functions and outstanding power consumption advantages, which save energy. Brought a huge impact to Intel.

It can be said that in the past few years, Intel and ARM have been two rivals. The simple analogy is that Intel is like a powerful giant truck. It can either pull a car full of ore and easily go uphill, or it can pull The last group of children went on vacation, but the different situation was that they had to consume a lot of energy.

But ARM is more like a compact electric car, very flexible and very energy-efficient. The market battle between Intel and ARM is more about penetrating each other’s market.

So far, neither side has made significant progress. So the story goes back to NVIDIA’s acquisition of ARM. What’s interesting is that ARM, which originally intended to compete with Intel, may now have to commit to NVIDIA to compete head-on with Intel, his long-time rival.

The impact of mergers and acquisitions

First of all, NVIDIA’s acquisition of ARM will further reshuffle and integrate the chip industry.

NVIDIA chips have been used for data-intensive task processing tasks. Typical application cases are games on gaming computers, scientific research computing development and artificial intelligence, autonomous driving, and even high-intensity computing for blockchain mining. The combination will help NVIDIA enter into smart phones, 5G, edge computing, wireless devices, IOT, robotics, and a series of fields he originally wanted to enter.

From a technical point of view, NVIDIA’s essence and technology core is a GPU (graphics processing unit) company. Its strength in CPU is still quite different from Intel and AMD, especially in complex computing, large data centers and other fields. aspect. For example, it lost to Intel and AMD in a recent bid by the US Department of Energy.

Therefore, the ability to organically combine ARM’s CPU technology and the talent advantages of its team will enable NVIDIA to become a super powerful company in terms of the combination of CPU and GPU.

Secondly, the combination of NVIDIA and ARM will undoubtedly form a tripartite pattern with Intel and AMD, making the future high-intensity server, data center and other fields more competitive. With the help of NVIDIA’s strength and its graphics processing capabilities, ARM will be more invincible in its wireless mobile phone terminals and other fields.

Impact on Chinese industry

In this possible merger and acquisition event, the most domestic concern will be that the two mergers and acquisitions will have a complicated impact on China’s current technology market. As we all know, China is a big country in the production of mobile phones, and most of the core technologies of mobile phones use ARM technology.

SoftBank revealed in 2018 thatAbout 95% of all advanced chips designed by China are based on ARM technology, and China contributes 20% of ARM’s total sales. In the past, because ARM was a Japanese and British company, it was not subject to sanctions and restrictions under the long-arm jurisdiction of the United States in many areas.

ARM China also stated many times earlier, “We have never stopped supplying and have been supporting Huawei, including the release and continuous shipment of Huawei products. Second, our ARM China products are derived from the British architecture. You can see , Our V8 architecture and subsequent architecture have also been clarified that these two products can continue to be supplied to Chinese customers, including Huawei, if they are legally compliant.”

In May 2017, in order to accelerate ARM’s global strategy and support the further development and independent innovation of China’s IC industry, ARM and Hou’an Innovation Fund signed a memorandum of cooperation to establish a Chinese-controlled joint venture in Shenzhen, China. The former will provide for the joint venture Core intellectual property rights, technical support and training required for chip design.

However, the times have changed, and the present is not what it used to be. In the recent period, the United States has been pressing harder and harder to suppress China’s science and technology, and the sword is pointing to the key. And now ARM is now going to become an American company through and through.

When answering the above questions, you can find that the real problem is much more complicated than this.

First of all, the architecture of the chip and the operating system are closely linked. At present, the mainstream operating systems for mobile terminal devices are only Android (Google Android system) and IOS (Apple).

Taking Huawei’s Kirin 980 chip as an example, the most important part is the CPU and GPU mentioned above. Cortex-A76 and Mali-G76 are all micro-architecture authorizations purchased by Huawei from ARM, and the Android system and The ARM structure is closely matched, not to mention that a series of environment support development tools provided by ARM are needed here.

Imagine that one day if ARM is cut off, then using Android to support another non-mainstream microstructure and corresponding development tools (such as RISC-V) will be a very difficult thing and a long way to go.

This is the fatal problem facing every mobile phone manufacturer in China today! To describe this issue from another angle, it is: Today the United States has been ruthlessly against Huawei and included it on the list of entities. Therefore, all related technologies in the United States will be cut off or banned from Huawei. All mobile phone manufacturers have adopted the blockade of supply cuts. What kind of situation will Chinese mobile phone manufacturers face! I believe that many people in the industry do not want to see this happen and the impact is hard to imagine.

In fact, when talking about whether ARM will ban China’s industry, I have to talk about a news released by the US Department of Defense not long ago that it may impose sanctions on China’s chip foundry SMIC. As we all know, SMIC is the largest and most technologically advanced wafer foundry in China.

However, most of SMIC’s main production equipment and materials come from Western countries such as the United States. If the supply of equipment and materials is cut off, it will seriously affect the production of the next generation of chips.

The wafer manufacturer in the semiconductor industry is equivalent to the construction material manufacturer in the construction industry. Without construction materials, what kind of building you build will be very difficult. Without the crystal garden (chip), you would not May make any (high-end) mobile phones or other electrical equipment. In fact, when worrying about the sale of ARM, you should be more concerned about the future of the chip, because as the saying goes, there is no skin, and Mao will be attached.

Industry outlet

1. Import substitution is the only way. It is not difficult to imagine that China has and will continue to emerge more and more start-up companies in various segments of semiconductors. With capital, talent, direction, and market all available today, all that is left to catch up with the world’s advanced level is a good investment environment and time. This is the only way, and now there is no choice.

2. Actively integrate into the global innovation network. Improve scientific and technological innovation capabilities in open cooperation. The more we face the blockade, the more we must go to the world with an inclusive and mutually beneficial attitude and accept first-class talents. Among them, we must use the power of capital to go overseas to achieve win-win and mutually beneficial investment cooperation.

3. Optimize domestic capital invested in the semiconductor industry. The semiconductor industry, like many high-tech developments, is not that the more money you spend, the faster it develops, the better the effect. In fact, the unreasonable or unprofessional use of capital and investment will have the effect of bad money chasing good money in the market. Even good entrepreneurs and start-up companies will be devastated. Capital operation and industry development must have deep participation of industry and investment experts.

4. Give up fantasy. In an interview with the media, Ni Guangnan, an academician of the Chinese Academy of Engineering, said that the “ZTE Incident” and “Huawei Incident” are “warning agents” for the whole people, reminding the chip industry of shortcomings and necessity, and there is a positive side.

And to break through this core technology, China must have the mental preparation of “sit on the bench for ten years.” That is to say, China is about to enter the second stage of “hiding our capacities and biding our time” (of technological innovation and development).

The semiconductor industry is indeed an industry that requires a lot of hard work, slow work and meticulous work, and it may take many years or even ten years to catch up.

The possibility of ARM M&A failure

NVIDIA, ARM, two chip giants want to merge: the impact on China's technology industry is beyond imagination 3

Although Nvidia has announced the acquisition of British chip designer ARM from SoftBank Group, there are still some uncertainties in this merger:

First of all, this kind of merger has broken the original market neutral position of ARM itself, and will bring more complicated factors and influences to the current relationship between ARM and other partners. Therefore, whether it will cause a rebound in the industry, especially large companies like Apple and Samsung will be sensitive to the new pattern;

On the other hand, the relevant government may adopt anti-monopoly laws to oppose the merger of this project, which is a greater challenge for the success of the merger;

Third, the British government may be reluctant to see such mergers and acquisitions happen. ARM, as a high-tech company, is one of the few outstanding companies in the IT industry in the UK, and it is the pride of the UK. Although the United Kingdom and the United States are like brothers, when this company is acquired by an American company, its situation will be different from that of SoftBank.

The reason is that SoftBank is only a giant fund after all, and his acquisition is just a change of shareholders, more on the capital level.

Now if ARM is acquired by NVIDIA, this company will be gradually absorbed and digested by the company he acquired in a few years according to industry conventions.