Apple buying ARM would have been a hard sell

As it is, ARM’s co-founder has already launched a “Save ARM” campaign to try to maintain the semiconductor design company’s independence.

From Gizmodo’s “Nvidia Buying Arm Means Nothing for Apple, but Maybe Good Things for Nintendo” posted Monday:

As Ars Technica points out, Arm itself doesn’t produce its own chips—it licenses its technology to other companies based on its Arm CPU architecture. Apple, Intel, Samsung, Qualcomm, and Huawei are all examples of companies that license from Arm. That means it’s a real no-no for Qualcomm, the chipmaker that’s already in the majority of Android smartphones, as it would practically mean total domination of the market. Likewise, Google wouldn’t be in the running as it’s already under intense anti-trust scrutiny—buying Arm would only make it worse when you factor in Google’s dominance due to the Android operating system. Apple might’ve made some sense on account of all the hullabaloo that is Apple Silicon, and SoftBank did hold preliminary talks with the Cupertino tech giant, but again, with so many of its rivals as Arm licensees, it would’ve been a hard sell.

Nvidia, however, is the least controversial processor company that could buy Arm. While it also licenses Arm technology, Nvidia’s main schtick is GPUs. There’s a reason you don’t really hear about Nvidia with regard to smartphones. In fact, the only real outside hardware using its mobile chipset Tegra is the Nintendo Switch and the Magic Leap headset, which let’s be real, doesn’t really count as a win. That said, should the deal go through, Nvidia buying Arm could mean a lot of major improvements to the Tegra chipset and could theoretically, be a good thing for Nintendo down the line…

This deal is huge and will have a huge ripple effect on the industry. Not only will Nvidia, practically overnight, gain a huge foothold in the smartphone market, it’ll also position it as a major player in the riveting world of… data centers. Nvidia CEO Jensen Huang has been quoted by both Bloomberg and the New York Times as stating a major priority will be expanding Arm chips for networking and cloud computing—an area that Intel has a 90% share in.

My take: I like friend-of-the-blog Fred Stein’s take…

Side note: NVIDIA acquires ARM for $40B. That’s a rough proxy for the value of Apple’s silicon design IP, which carries a value of $0 on their balance sheet. Yet another hidden asset.

13 Comments

  1. Dan Scropos said:
    Fred’s point cannot be overstated, and that value will only grow.

    4
    September 14, 2020
    • Fred Stein said:
      Thanks Dan,

      And their foundry, TSMC, leads the field by at least a year.

      And no other company has one architecture from AirPods to Mac (including servers some day), and soon including IoT with AirTags.

      And no other company has the full sw stack tightly … and securely … integrated.

      What’s all that worth?

      4
      September 14, 2020
      • David Drinkwater said:
        Apple *did* servers once. And then it killed them. I don’t expect to see Apple get back into that. But I am totally open to being wrong.

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        September 14, 2020
    • Bart Yee said:
      @Dan, well stated, and @Fred, a perfect comment. Apple’s investment in CPU and other custom chips designs (power controllers, graphics, local ultra wideband (U1 chips), encryption / sandbox, now modems, etc.) is completely in plain sight, yet as you say, literally valued as “Free” by Wall Street. The fact that Apple partners with TSMC and TSMC takes the foundry risk but benefits from Apple as a huge customer resource willing to help it push the nanometer fabrication boundaries cannot be understated. Win-Win for both companies. And TSMC has 13 fabs, all in Taiwan ROC except 2 in China and 1 in Wash. state. Only physical existential threat would be China or natural disaster.

      Also, as we know here, custom chips allow better focus on power and space savings, tremendous tightly integrated software and hardware, no wasted space for off the shelf parts, no wasted efforts to work around others’ limitations, no dependence on one supplier (except Qualcomm for modems and Samsung for OLEDs & their driver chips).

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      September 14, 2020
  2. Gregg Thurman said:
    What’s all that worth?

    Nothing if the technology isn’t Used to create products consumers not only want, but are willing to pay a premium for, and therein lies the magic of Apple.

    Lots of companies possess great technology, their weakness is that they don’t know how to use it.

    3
    September 14, 2020
    • Bart Yee said:
      @Greg It could be argued that Android users, for whatever reason, are conditioned to NOT pay much for advanced or leading edge technology or design. Witness the continued decline of Samsung Galaxy Flagships – Galaxy S20 sales << S10 < S9 < S8 < S7 which was their best seller. Galaxy Note series, despite its "fabulous" kitchen sink approach to engineering features, barely sells 6-8M units annually, so really a small niche item. Similarly, Google Pixel cannot decide what it is, flagship or now "value" phone, hardware choices uneven, execution even more so, never produce nor sell more than 7-9M units annually (all models combined!!) – no focus or internal support despite spending $1.1B to buy part of HTC's design team and IP. I suspect the same will occur with Google buying Fitbit and not knowing where to go with it, much like they did with Nest (and Dropcam), Motorola Mobility, or Waze. Hardware is an afterthought with Google.

      Huawei and Xiaomi (via Redmi) have made inroads in China for higher end, near premium Android phones, but relatively low sales internationally of these more expensive models.

      0
      September 14, 2020
    • Bart Yee said:
      @Greg Oh, I forgot to mention that “new” era of folding phones, all Android, the Samsung Fold ($1980) Z Fold2 ($1999), Z Flip ($1299-$1449 w/5G), 2 iterations of the Motorola Razr ($1499-1399), and the Huawei Mate X / XS ($2400-$2700) (how original for names!).

      Newest research shows that over the last year, only 1.78M units of all the above COMBINED have sold, and many with generous trade-ins, discounts, or bundles. So this very small niche market is hardly developed, or overpriced for early tech / adopters, and waiting for superior hardware and value. Apple is wise to just continue with R&D to iterate and perfect any folding product it may (or may not) ever introduce.

      “Sometimes the best trade you do is the one you don’t do”

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      September 14, 2020
    • Fred Stein said:
      Yes, tech alone is not enough.

      Still, Apple suffered, nearly fatally, when they were at the mercy of Motorola and later IBM / PowerPC for chips. Jobs and Cook got us through that.

      The tree metaphor comes to mind. The chip and supply chain are the roots, the SW stack the trunk, developers, the Apps, the entire retail experience are the branches, and us loyal users/fanboys/girls are the leaves.

      The software stack creates the magical UX.

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      September 14, 2020
  3. Michael Goldfeder said:
    Toss in the growing Euro escrow account in the sum of approximately $15 billion Euros when it was deposited several years ago as part of the Ireland taxation litigation with the EU. That account is not only earning interest, but the Euro has been rising in value the past three months making that account another nice addition that isn’t currently on the balance sheet.

    4
    September 14, 2020
    • Gregg Thurman said:
      making that account another nice addition that isn’t currently on the balance sheet.

      This shows up under the heading of Contingent Liability. It is Contingent because there is uncertainty as to whether Apple will have to pay the alledged tax.

      If it is finally determined (ie., Vestager doesn’t file an appeal to the latest EU Court ruling) the principle amount will be transferred to Cash with any gains transferred to Other Income/Expense.

      FWIW, I don’t think Vestager is going to file an Appeal.

      3
      September 14, 2020
      • David Emery said:
        I was involved with a group who ran a technical conference in Paris back around 1985. It took a really long time to close out the books in France, and the group’s primary income that year was from the change in the Franc against the Dollar (pre-Euro…) 🙂

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        September 14, 2020
    • Bart Yee said:
      @Michael and @Greg Too bad Apple had to put that $15B in basically cash and fixed income instruments. Apple paid in $13B plus $1B in interest from March 2018 to Sept. 2018.

      If Apple had been allowed to put that money into AAPL shares instead (via buybacks or just putting shares into the account), they would have paid about $47 / share split adjusted and bought, oh, about 297.87M post split or 74.47M shares pre-split shares. Gosh, that would only be worth, oh, $34.4 Billion (!) today, and creating essentially LOST gains or investments to Apple and its shareholders. What say Apple should BILL the EU for the loss of $20 billion in lost use of the money PLUS the dividend expense and interest???

      Turnabout is fair play.

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      September 14, 2020

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