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Ni Guangnan says China will likely reject the Nvidia-Arm deal. Photo: Handout

Beijing likely to reject Arm-Nvidia deal over US fears, says former Lenovo chief engineer

  • Beijing’s main concern, according to most China watchers, is the risk of Arm technology coming under US export control regulations
  • US tech sanctions have galvanised China to double down on developing its own domestic semiconductor industry

The former chief engineer of Chinese computer giant Lenovo Group believes Beijing may block Nvidia’s acquisition of SoftBank-owned chip architecture company Arm over fears that the technology would fall under US export controls.

“I believe the Chinese commerce ministry will reject the acquisition,” said Ni Guangnan, 81, an academic under the Chinese Academy of Engineering. He was speaking at a forum in Zhengzhou, Henan province, the transcript of which was posted on Chinese news portal Sina.com.

Ni, a strong advocate of China’s self-sufficiency in key technologies, said China would not be “comfortable” using the Arm chip architecture if it were owned by a US company.

Early this month, SoftBank-owned Arm said Nivida, a leader in GPU and AI computing chips, agreed to buy Arm for US$40 billion.

However, China’s antitrust regulator could block the deal on the premise that it could create a monopoly for the supply of chip design tools. But Beijing’s main concern, according to most China watchers, is the risk of Arm technology coming under US export control regulations.

Can China’s chipmaking drive save it from US embargo?

“If the acquisition were to happen, it could bode ill for us,” Ni said.

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Relations between China and the US have reached their lowest point in decades after a protracted trade spat morphed into a full blown tech war. After blocking China’s telecoms champion Huawei Technologies from buying semiconductors from global suppliers, Washington is now taking aim at China’s leading wafer foundry, Semiconductor Manufacturing International Corporation (SMIC).

The Shanghai-based chip maker is facing restrictions on access to US technology over Washington’s concerns that its products could be diverted to the Chinese military, a charge the company has repeatedly denied.

Ni said two IP design architectures were currently prevalent in the semiconductor industry – one invented by US chip giant Intel and the other belonging to Cambridge-based Arm.

Arm told its staff to stop working with Huawei after the US put the Chinese tech giant on a trade blacklist in May 2019. Arm reversed the decision after it was decided its technologies were of UK-origin.

US-China tech war fuels battle over semiconductors, Taiwan

Arm entered China in 2002 and now has a predominant position in the market, deriving about 20 per cent of its revenue from Chinese customers, according to a Reuters report. Arm’s 200 Chinese licensees, which include Huawei, have shipped more than 19 billion devices as of mid-September, according to the website of Arm China, a subsidiary of Arm UK.

Arm headquarters in Cambridge, UK. Photo: Handout

The US tech sanctions have galvanised China to double down on developing its own domestic semiconductor industry, which still significantly lags the west in terms of technology despite several attempts to catch up. The country imported more than 300 billion yuan (US$44 billion) worth of chips last year, up from 200 billion in 2013.

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Ni said he was confident China could catch up with the world in semiconductors “as soon as possible”. However, he noted that chip technology was a weakness for the country. “The task we are facing is to build our own information ecosystem, not a single product or technology,” Ni said.

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This article appeared in the South China Morning Post print edition as: Beijing likely to say no to Nvidia’s deal for Arm over US export control fears
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