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NVIDIA and arm's major M & a deal will transform the chip industry

via:雷锋网     time:2020/10/2 14:54:17     readed:785

NVIDIA's $40bn acquisition of arm is expected to have a significant impact on the chip world, but it will take many years to fully understand the impact of the deal. More such deals are expected in the next few years due to a variety of factors, including increased interest in acquiring start-ups with innovative technologies and easier access to equity markets to raise money.In addition, many emerging markets are gradually warming up, such as 5G, edge computing, AI / ML and the sustainable development of autopilot.

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In the short term, most industry mergers and acquisitions are affected by the new crown epidemic, but this will not continue.Acquisition is the fastest way to achieve scale growth and improve the company's products, and it is also a way to quickly absorb talents.

NVIDIA's acquisition of arm is a combination of the world's largest GPU supplier and the largest mobile processor IP provider, which will help NVIDIA expand its business scope from data center to edge and terminal. The deal also helps the two companies position themselves in the uncertain but emerging world of edge computing, where highly specialized devices and servers are used to preprocess or process large amounts of data. In addition, arm has a wide range of ecosystems.

"As a merger, we can do a lot of things. An increased investment will enable us to actively promote the development of data centres and extend the AI that have been widely used in data centres to all corners and to the margins ." "Nvidia has a large portfolio of IP products that can be used to build chips, products and systems ," said Simon Segars, chief executive. we grant IP licenses to the global semiconductor industry and build an ecosystem around it. As a result, we will have more IP licenses to our customers ."

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The success or failure of M & A, time will give the answer

Nvidia acquisition of Arm is now subject to review and approval by national regulators. Texas Instruments (Texas Instruments), which bought for $7.6 billion in 2000 Burr-Brown, appeared to be a sensational deal, but the results proved much more limited than initially expected, according to several industry insiders familiar with the deal.

The merger of the two companies has enhanced ti's capabilities in the field of analog technology and enhanced the company's business focus, but the impact on the industry as a whole is less obvious. The same is true of TI's $6.5 billion acquisition of national semiconductor in 2011.

ADI, by contrast, bought Linear Technology, for $14.8 billion in 2017 and bought it for $21 billion Maxim Integrated, making it a TI powerful competitor, dominating the simulation field for decades. ADI acquisitions have brought more price and performance competition to this lucrative market and opportunities for startups.

The merger and acquisition in EDA and IP field is more than that in other areas of chip industry

EDA has more acquisitions than any other sector in the chip industry, although most of the acquisitions in the EDA industry are relatively small.However, the three EDA companies will never be the big three without acquisitions to drive their growth, and the chip industry is unlikely to grow as before.Synopsys alone has completed more than 100 acquisitions. Mentor has done more than 70 acquisitions, while cadence has done more than 50. (this figure is not accurate because some are spin offs and acquisitions of assets, not the entire company.)

"Many products are incremental and have improved both technically and economically. one of our very big acquisitions deals was Avant,Synopsys at that time built the so-called design front end, synthesis, simulation, timing, power consumption, etc. At that time, the back end was physical design, it was layout wiring and some verification, it was done by different companies ." Aart de Geus Synopsys chairman and co-chief executive,

"In the late 1990s, I became increasingly concerned that, from a technical point of view, the interdependence between design and back-end design would become stronger and stronger. That happened around 2000, when concerns were expressed about the impact of the downturn. It turned out that during the Great Depression of 2001, many consumers intended to reduce spending. As there is only one company ——Mentor between the two, we think it is necessary to improve our ability to participate in the competition ."

It is Cadence that opened the M & A of the EDA industry. The two acquisitions that stand out in the EDA are Cadence-Gateway and Cadence-Tangent." The Mentor's honorary chief executive Wally Rhines said, As the world moves from schematic to RTL, Gateway Cadence into the gateway development Verilog services, and this pushed Verilog to become standard. Although trade associations are VHDL, But Verilog is in the lead ."

arguably the most significant acquisition in the EDA industry involves a 2016 siemens (Siemens AG) acquisition of Mentor.Siemens is a large conglomerate and the largest industrial manufacturing company in Europe. The $4.5 billion deal enables Siemens to provide complete services from design software to complete semiconductor processes.

At the same time, it also makes mentor a strong company with a capital scale much larger than all EDA companies combined. From this perspective, Siemens' revenue will exceed $100 billion in 2019. The combined market value of all EDA companies is only a small part of it.

IP companies are also actively buying other IP companies, and arm's growth is at least partly due to acquisitions over the years. Some EDA companies, especially cadence and Synopsys, have also acquired many small IP companies.

K. Charles JANAC, chairman and chief executive officer of arteris IP, said: "the most important acquisition to date in the IP space has been the nearly $1bn business of Synopsys, focusing on peripheral I / O IP and PHY technology.NVIDIA's acquisition of arm is of great importance to both the IP industry and the semiconductor industry. NVIDIA is trying to become the next generation computing platform, competing directly with Intel and AMD. Therefore, with NVIDIA's support, maybe arm architecture will become the next core of SOC. "

The key is synergy. "I used to work for Joe Costello, when he was cadence's CEO, and he had a few interesting ideas." "The deal is a good financial deal, but there has to be some synergy," JANAC said. If two companies are put together, the sum of them should not be equal to 2 or 2.5, but should be 3 or 4. The two companies also need to be culturally compatible and actively cooperate. Another thing Costello said is that the best deal is that both sides are not happy with the deal. If someone is really happy, it may not be much. "

Major acquisitions in processor and memory

Amd acquired ATI, a GPU manufacturer, for $5.4 billion in 2006, making amd an important competitor of Intel in the data center market."Amd has acquired ATI's graphics business, which enables them to further develop their CPU business on top of Intel compatible CPUs." Wally Rhines, honorary CEO of Siemens mentor. "ATI is a very unique company. If you look back at history, you'll see that as graphics standards change, a new graphics company appears about every 10 years. ATI is the only company that has survived several generations. "

"Hitachi and NEC merged into Elpida, which was acquired by micron," he said. This has indeed enabled Meguiar to retain DRAM business. Today, there are three major DRAM suppliers in the world. Although Meguiar is the smallest, the deal gives them enough technology and competitiveness, as well as the influence of Japanese companies. "

Shane RAU, vice president of research at IDC, agrees. "Meguiar's acquisition of Elpida brought them over the threshold," he said. There are now three major memory companies, which is necessary for them to have sufficient supply and demand in DRAM. We expect consolidation in the NAND market as well. "

Government intervention and influence on acquisition

However, not all of the announced acquisitions will be realized. The review process can produce unexpected results, and governments may believe that the country is under threat.Other countries such as the U.S. government are responsible for delaying the start of its major trading or market forces in the pastChina has rejected Qualcomm's $44 billion plan to acquire NXP.

There are many similar cases.The most important first deal in the chip industry was Fujitsu's attempt to acquire Fairchild in 1987.At the joint request of the United States Department of Defense, the Department of Commerce and the CIA, then President Ronald Reagan (Ronald Reagan) intervened. The deal made the chip industry, especially the government, the first attention, and prompted the birth of another industry giant.

"Due to the failure of Fujitsu's acquisition, National Semiconductor acquired Fairchild Semiconductor." "The deal is significant because national semiconductor has kept its R & D investment to a minimum for decades, and Fairchild Semiconductor, led by Don Brooks (then president and CEO), developed excellent new technologies," Rhines said. It gives national semiconductor a new life because a company that minimizes R & D investment and maximizes operational excellence acquires a company that maximizes R & D investment. "

The U.S. government has also played an important role in two other deals that indirectly affect the chip industry. The first concerns the consent Act signed by IBM in 1956, when it was intended to limit the monopoly pricing of IBM's bundled services, software and mainframe computers, known as the "market basket.".

IBM was the only company to provide these three functions at that time, and because the platform at that time was also the industry standard, all software must be compatible with IBM devices. As a result, IBM uses its market influence to compete with any of the three market segments with low price strategy.

The U. S. government also interrupted the Bell system in 1982 to allow another deal to be concluded. ATBell Labs invented the first transistor in 1947, which became the Linux based UNIX operating system and the first optical router.

Bell Labs was sold to Alcatel as part of Lucent in 2006 as part of the spin off and was acquired by Nokia in 2016. Meanwhile, global foundries acquired IBM's microelectronics business in 2015. The two acquisitions ended two of the largest semiconductor research businesses.

Although IBM is still doing chip research for AI systems, in the United States, the heyday of corporate and corporate / government funded semiconductor research, especially in communications and computing, has come to an end.

Governments have also blocked other deals in the chip industry. The Committee on foreign investment in the United States (CFIUS) blocked Tsinghua's $23 billion acquisition of micron in 2018. The Department of justice also blocked a $9.3 billion merger of Applied Materials and Tel in 2015.

A $40 billion cap on M & A

NVIDIA's acquisition of arm remains the largest in the semiconductor industry, though in small numbers. Avago bought Broadcom for $37 billion in cash and stock. However, it is worth noting that there appears to be an acceptable upper limit.

Rob Lineback, senior market research analyst at IC insights, said: "a few years ago, we determined that semiconductor M & A agreements (excluding transactions related to systems level and software businesses) had reached a cap of about $40 billion.Qualcomm's failure to acquire NXP for $44 billion was cancelled in July 2018, as China has been delaying approval of the deal during the trade war. Broadcom's hostile offer of $121 billion for Qualcomm, which was later reduced to $117 billion, was blocked because of concerns about the loss of the country's leadership in the field of cellular communications technology. "

Despite the availability of funds and the willingness of companies to participate, scale is still important. "Due to the high value of large-scale transactions, the rise of trade protectionism among more countries and the intensification of trade frictions, about $40 billion seems to have become a feasible acquisition scale limit for the semiconductor industry." Lineback said,

"Geopolitical environment and trade war may continue to limit the scale of semiconductor M & A. But NVIDIA's $40 billion agreement violates this hypothetical ceiling. NVIDIA's deal with arm not only affects major players in many areas of the IC industry, but also appears to be a test of today's geopolitical restrictions on chip acquisitions. "

In China, there are also share restrictions on takeovers. If a non local company wants to establish a joint venture, the Chinese partner company needs to own 51% or more shares of the subsidiary. "The deal is significant for arm to divest 51% of arm China," said RAU of IDC. This is one of several deals to bring intellectual property to China. MIPS is open to China, and risc-v is also open to China. "

The semiconductor industry is entering a new stage

How new acquisitions will change the chip industry remains to be seen, but the slowing down of Moore's law, the development of more heterogeneous chip design and the driving force for processing and intelligent demand are changing the dynamics of the chip industry.

"We seem to be entering a new stage in the semiconductor industry, where vertical integration with large semiconductor companies in the 1970s and 1980s typically developed their own processor cores, EDA tools, and sometimes even processing devices." Roddy Urquhart, senior marketing director at codasip, said.

"By the 1990s, this situation had been broken up by companies such as Texas Instruments and Siemens semiconductor (spun off in 1998), abandoning their internal EDA tools in favor of commercial tools. At the same time, IP companies, including arm, MIPs, arc and Tensilica, came into being to provide alternatives to internal cores. By 2000, most companies in the world rely on the three EDA companies and arm to meet most of the design tools and IP requirements. In the same time frame, we have seen the emergence of pure wafer foundry and the growth of fabless semiconductor companies. With the stable business environment, global IC design has been developed in many regions, especially in China and India. "

The recent geopolitical tensions have broken this stability. "Because China is unable to use American technology, such as Android, some EDA tools, and they will be forced to build local ecosystems. Arm is considered a third party company completely independent of its licensees, but will be broken after being acquired by NVIDIA. In the processor area, risc-v is a significant alternative to the company's attention. This is also an opportunity for EDA companies based in neutral areas such as Germany or Canada. "

More mergers and acquisitions allow the market to restructure in different regions, the adoption of new technologies and the need to process more data in more places will lead to more acquisitions, but the pace is unclear.

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