WEBVTT 00:00:00.000 --> 00:00:04.720 One of the New Year's biggest tech headlines was how NVIDIA's proposed to take over of 00:00:04.720 --> 00:00:11.840 ARM crashed and burned. Haha, huge deal, because it would have made NVIDIA the world's most powerful 00:00:11.840 --> 00:00:19.040 chip maker. So, um, why exactly did the deal fall through? Well, ARM's an incredibly important 00:00:19.040 --> 00:00:23.840 company because it designs chips for lots of other companies. Instead of manufacturing chips 00:00:23.840 --> 00:00:29.680 for itself, ARM licenses its designs out to other firms, many of whom compete with each other. 00:00:30.000 --> 00:00:35.520 For example, Apple and Samsung both own ARM licenses, even though those two are at fierce 00:00:35.520 --> 00:00:39.920 rivals in the smartphone space. Although ARM is a for-profit company like any other, 00:00:39.920 --> 00:00:45.280 their unique position as a designer for so many players in the industry has made their neutrality 00:00:45.280 --> 00:00:50.000 very important. You know, like, kind of like Switzerland neutrality. And there were already 00:00:50.000 --> 00:00:55.520 some concerns back in 2016 when UK-based ARM was sold to their current owner, SoftBank, 00:00:55.600 --> 00:01:01.520 a Japanese holding company. But because SoftBank wasn't already in the business of chip making, 00:01:01.520 --> 00:01:06.640 the deal eventually went through with that incident. But the proposed NVIDIA acquisition 00:01:06.640 --> 00:01:12.320 was very different. NVIDIA was already one of ARM's licensees, and it was directly competing 00:01:12.320 --> 00:01:17.920 with other companies like AMD and Intel that also depend at least partly on ARM's designs. 00:01:17.920 --> 00:01:22.400 Now, there are other companies that produce chips on a contract basis for its competitors. 00:01:22.400 --> 00:01:27.120 Samsung is a good example of this, producing chips for NVIDIA. But this is more on the 00:01:27.120 --> 00:01:33.440 manufacturing side. ARM's designs are used in so many products that if NVIDIA tried to pull a 00:01:33.440 --> 00:01:39.200 fast one on one of its rivals and restrict access to ARM chips, there may not be a clear alternative. 00:01:39.200 --> 00:01:44.720 Further complicating matters is how big NVIDIA already is, without even taking ARM into consideration. 00:01:44.720 --> 00:01:49.200 Although they might be less of a household name than Intel, they're actually the second largest 00:01:49.200 --> 00:01:54.000 chip maker in the world by market capitalization, which is the total value of all of its outstanding 00:01:54.000 --> 00:02:01.840 shares. In fact, the market cap is actually larger than AMD and Intel's combined. Needless to say, 00:02:01.840 --> 00:02:07.280 all this got the attention of other large tech companies, namely Microsoft, Google's parent 00:02:07.280 --> 00:02:14.000 Alphabet, and Qualcomm, who all screamed bloody murder at the prospect of having an important 00:02:14.000 --> 00:02:19.760 source of chip designs controlled by a direct competitor. And Apple, which uses ARM for most 00:02:19.760 --> 00:02:25.280 of its devices, already had a frosty relationship with NVIDIA, owing in part to issues with faulty 00:02:25.280 --> 00:02:31.520 GPUs around 2008 and 2009. Apple systems were among those affected, and NVIDIA allegedly did not 00:02:31.520 --> 00:02:37.440 provide adequate monetary support to Apple to help fix those problems. So would Apple be happy if 00:02:37.440 --> 00:02:42.640 they had to rely on NVIDIA for their new Apple Silicon lineup? Okay, so those are the concerns. 00:02:42.640 --> 00:02:47.440 But who actually shut the deal down? The concerns of NVIDIA's rivals were very much taken into 00:02:47.440 --> 00:02:52.720 consideration by regulators in several powerful countries. It's hard to get the West and China 00:02:52.720 --> 00:02:59.120 to agree on anything these days, but regulators from the US, the UK, the EU, and China all opposed 00:02:59.120 --> 00:03:03.440 the deal. The Western powers were primarily concerned about the buyout being anti-competitive 00:03:03.440 --> 00:03:08.480 and possibly allowing NVIDIA to restrict access to chip designs. The UK in particular was also 00:03:08.560 --> 00:03:13.600 worried about its own national security as ARM is based in Britain. Meanwhile, China had its own 00:03:13.600 --> 00:03:19.120 security concerns as it wants to use ARM designs in its own chips, and didn't like the idea of having 00:03:19.120 --> 00:03:25.440 to buy them from NVIDIA, an American company, as if ARM losing the market neutrality wasn't already 00:03:25.440 --> 00:03:31.760 enough. So the deal was unsurprisingly blocked. But what's next for NVIDIA and ARM? Now NVIDIA is 00:03:31.760 --> 00:03:37.520 doing just fine as a company, don't worry about them. They're worth over half a trillion dollars, 00:03:37.520 --> 00:03:42.080 and all team green is really losing is an inroad into the mobile market. While ARM would have 00:03:42.080 --> 00:03:47.520 been a very nice ad for NVIDIA, the deal's failure shouldn't really hurt any of their future prospects 00:03:47.520 --> 00:03:52.240 too much. As for ARM, the reason they were interested in becoming part of NVIDIA is because 00:03:52.240 --> 00:03:59.440 designing chips is a difficult, expensive process. And NVIDIA has, well, lots of money that could 00:03:59.440 --> 00:04:04.320 back them. Now that the deal is off, it looks like ARM will try to raise money through an IPO 00:04:04.320 --> 00:04:09.840 instead, initial public offering, which was SoftBank's original fundraising plan before NVIDIA 00:04:09.840 --> 00:04:16.160 approached them. We could speculate on how that will go, but this isn't, you know, investment 00:04:16.160 --> 00:04:20.560 advice quickie. Thanks for watching guys, like, dislike, check out some of our other videos, 00:04:20.560 --> 00:04:24.080 comment with some video suggestions down below, and don't forget to subscribe and follow.