China has more reason to block Nvidia’s Arm deal than approve it, say analysts

The proposed marriage between US graphics chip giant Nvidia and UK-based chip design specialist Arm might face the same fate as Qualcomm’s failed bid for European chip maker NXP if Chinese regulators have their way, according to analysts.

The US$40 billion deal could strengthen Nvidia’s leading position in graphics processors for artificial intelligence applications by giving it control over Arm’s vast computing ecosystem, which includes the architecture found in nearly every smartphone processor chip.

“Nvidia is the [market leader] in graphics and artificial intelligence [so] this is just expanding their lead where they see an opportunity,” said Cameron Johnson, an adjunct faculty instructor at New York University and partner at Tidal Wave Solution.

However, completion of the deal is far from certain as most Chinese watchers agree that Beijing would be concerned about the possibility of Arm technology coming under US export control regulations.

“China has more reasons to block the deal than to approve it,” said Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm Icwise. “How to guarantee Arm continues to be a neutral and open platform after the sale is what concerns China,” said Gu, who provides consulting advice to Chinese semiconductor companies.

Johnson said that while potential US export controls were a valid concern in the current geopolitical environment, in the case of Arm’s technology, it was freely available to all users via an IP licensing business model. Yet Johnson agrees that it will be challenging for China to approve the deal in the current environment.