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Written evidence submitted by Arm Ltd. (BFA0017)

Dear Mr Tugendhat,

RE: Inquiry – The proposed acquisition of Arm by NVIDIA

Thank you for your letter dated 22 September relating to NVIDIA’s proposed acquisition of Arm Ltd.

Before turning to your specific questions, I would like to highlight the unique opportunity that this transaction presents to establish the world’s leading computer company for the age of (AI). This will also reinforce the UK’s position on a global scale as a leader in AI and place it at the forefront of the technologies of the future.

As society stands at the threshold of the next great era in computing, defined by vast advances in AI, there are incredible opportunities in nearly every industry worldwide. This new era will be unlike anything we have seen in the past—every industry, and every application, presents unique challenges. Our success will require diligence, resolve, and now more than ever, collaboration with the world’s most innovative companies.

NVIDIA is an ideal parent for Arm for this new era. The two companies have the same drive and innovative spirit, and we have developed different, yet entirely complementary, strengths. Arm is best-known for world-class, power-efficient IP for mobile/cellular CPUs that drove the revolution. Our IP licensing business is unparalleled. NVIDIA is best- known for world-class GPU-powered platforms for datacentres/PCs that solve the world’s most intensive computational challenges and have ignited modern AI.

By bringing together these two great companies and our complementary strengths, we will enable the UK to be a leader in the next phase of computing innovation and grow Arm’s R&D resources and capabilities in several ways. NVIDIA will invest in Arm’s UK sites, enhancing the UK’s position as a breeding ground for world-leading technology and the associated benefits that brings.

NVIDIA will expand Arm’s R&D presence in the UK through continued additional investment and by establishing a new world-class AI research centre in ; it will be the home of a state-of-the-art powered by Arm CPUs and NVIDIA GPUs, with NVIDIA networking. This centre will serve as NVIDIA’s European hub to collaborate with universities, industrial partners, and start-ups, while remaining the HQ of Arm. In addition, Cambridge will become the home of the NVIDIA Institute for Europe.

The combination will enable scientists and engineers to create ground-breaking new IP in the UK, as they transform and adapt NVIDIA’s AI platforms and technology into new designs for the Arm ecosystem. NVIDIA will provide Arm with to NVIDIA’s GPU and Mellanox’s DPU networking technologies, as well as NVIDIA’s acceleration libraries, so that Arm engineers can modify, adapt, and improve them for the Arm architecture. Arm engineers in the UK, and the technology ecosystem built around Arm, will be able to reap the benefits of NVIDIA’s decades of work and billions of dollars of R&D effort.

Arm engineers will also have immediate access to NVIDIA’s array of domain-specific expertise, including in fields such as quantum chemistry, molecular dynamics, fluid dynamics and benefit from NVIDIA’s scientific computing algorithms, accelerated by NVIDIA’s platform.

And while we will benefit from NVIDIA’s investment and IP, much will stay the same. Arm’s HQ will remain in Cambridge, and I, along with key members of my management team, will join NVIDIA to lead and grow Arm as we pursue new challenges and expand our horizons.

I believe this transaction represents a great vote of confidence in Arm’s future, and a deep commitment to the UK. NVIDIA will be making a huge investment in Arm because it believes in our vision for innovation and can be tremendously helpful in exceeding our growth aspirations with its expertise and investment. Our current owner, SoftBank, shares this vision and will continue as an investor in the combined business. We continue to have a shared ambition and desire to building a stronger, more successful Arm business anchored here, in the UK, and we view this transaction as a giant step toward achieving that ambition.

Your questions i. What is your assessment of Nvidia’s reasons for investing in ARM? Do you have any concerns about Nvidia offshoring ARM’s UK R&D or IP, or other essential assets; or giving assurances to other Governments which could have this effect?

NVIDIA is pursuing this transaction because it shares our vision of the role that computing will play in the future of technology and society. NVIDIA plans to invest in Arm to help accelerate that shared vision and grow the Arm ecosystem. NVIDIA wants to grow our R&D in the UK, not reduce it. Arm’s UK engineers are key to the DNA of the company—their expertise and experience cannot be replaced or moved, and their talents are why NVIDIA is pursuing this transaction.

With that in mind, I have no concerns about NVIDIA offshoring Arm’s UK R&D or IP, which would defeat the purpose of the transaction. Rather than seeing concerns, I see a great opportunity in NVIDIA’s commitment to Arm and expect more R&D and IP in the UK than ever before. ii. Did any companies other than Nvidia make offers to acquire ARM, or express interest in doing so?

There were other companies that were interested in acquiring Arm. However, NVIDIA’s offer was by far the most compelling to maximize the potential of the company. Arm’s corporate owners, SoftBank Group and the Softbank Vision Fund, were solely responsible the decision, and should be contacted for any information in this regard. iii. Are you confident that under Nvidia’s ownership, ARM’s IP and R&D capability will remain within the UK? What guarantees have you had and are they enforceable? Should the Government seek to secure legally enforceable commitments from Nvidia on this or any other matter?

I am confident that Arm’s IP and R&D capability will remain within the UK and expect it to grow rapidly with the benefits of NVIDIA’s ownership and investment. From an export control perspective, Arm’s UK-origin IP will remain UK origin, that cannot change, no matter who owns Arm. From a tax and accounting perspective, there would be no benefit in moving Arm’s UKregistered IP to a different domicile and I expect that all new UK-generated IP will remain in the UK.

Arm’s current UK R&D capability cannot be moved outside the UK for the simple reason that Arm’s UK engineers reside in the UK—their expertise and experience cannot be replaced, and their talents are why NVIDIA is pursuing this transaction. As explained:

“Following the completion of the transaction, we want to grow Arm and help it become even greater. We want to buy Arm because it's an incredible company, and it employs some of the greatest engineering minds in the world.”

“We want more great engineers, not fewer. We want more R&D, not less. And we want that work to be done in the U.K. in Cambridge where Arm's great work began and where it continues. Arm's intellectual property created over the years by thousands of talented engineers will remain registered in the U.K., and Arm will remain based in the U.K.” Having led Arm for many years, I am not surprised in the least by NVIDIA’s plans, and would expect nothing less.

iv. What measures will be put in place by ARM to ensure that this transaction does not remove the UK’s access to its sovereign IP or R&D capability?

There is nothing in this transaction that should change or limit in any way the UK’s access to IP created by Arm. Furthermore, as outlined in questions i, iii, v and viii, we anticipate that Arm’s UK R&D capability will be increased, and not decreased as a result of this transaction.

For the development of new products Arm will continue to carefully manage and track the UK and non-UK content of products to ensure that we adhere to global export control regulations.

v. What investment is envisioned and what expansion will occur in the UK?

Jensen Huang, the co-founder and CEO of NVIDIA, and I are still working on our post- merger plans, but NVIDIA will invest and expand R&D in the UK in several ways, including at least the following:

First, NVIDIA will enhance Arm’s R&D presence in the UK, establishing a new global centre of excellence in AI research at Arm’s Cambridge campus. NVIDIA will invest in a state-of- theart, Arm-powered AI supercomputer, training facilities for developers and a start-up incubator, which will help to attract world-class research talent and create a platform for innovation and industry partnerships in fields such as healthcare, robotics and self-driving cars.

Second, in addition to the new AI supercomputer, NVIDIA will increase Arm’s R&D spend in the UK. Jensen and I share a vision to hire more great engineers, not fewer, and to do that in the UK and in Cambridge, where Arm's great work began and where it continues.

Third, NVIDIA will expand Arm’s R&D efforts to enhance and accelerate our product roadmaps and enable Arm’s UK engineers to adapt NVIDIA’s GPU and Mellanox DPU technologies, as well as NVIDIA’s domain-specific acceleration libraries, for the Arm ecosystem. Arm’s UK-based engineers will have a vast array of new IP at their disposal that they will be able to utilize as they bring new products to market.

vi. What are the implications of Nvidia’s acquisition of ARM for the UK’s position within the global industry?

NVIDIA’s commitment to Arm will create the world’s leading computer company for the age of AI, ensuring that the UK is at the centre of the global for the next age in computing.

For example, NVIDIA will spur Arm ecosystem growth in datacentres and in PC, two valuable markets where Arm has only a very small market share today. By combining Arm with NVIDIA, we will make the UK the home of a cutting-edge computing platform for scientists, inventors, and consumers everywhere. That really excites me.

In addition, NVIDIA will provide Arm new AI technologies that we can bring to Arm’s existing ecosystems. Working with NVIDIA, we will adapt and enhance NVIDIA’s AI libraries and platforms for the mobile ecosystem, bringing them to millions of Arm customers worldwide, and ensuring that the UK remains the worldwide centre of the mobile semiconductor industry.

We will accomplish all of that while continuing Arm’s status as a trusted partner to all licensees in the Arm ecosystem. Trust is essential to our business today and will be essential after the merger. We cannot grow the ecosystem without it. We will help our customers grow their businesses, and give them access to more technology, even faster than before. We will work to expand the array of IP choices and options available to Arm customers everywhere, ensuring that the UK is at centre stage in the era of AI. vii. Would the Nvidia-ARM transaction, (or subsequent investments by either company after closing), be subject to CFIUS jurisdiction?

CFIUS reviews apply to foreign investments into U.S. companies. This transaction involves an investment by a U.S. company so CFIUS has no authority over this transaction.

viii. Would Nvidia’s ownership of ARM bring ARM within the scope of US sanctions or export controls, and if so, what are some of the implications for ARM’s customer base, particularly in China?

NVIDIA’s ownership of Arm will not change the scope of application of U.S. sanctions or export controls. The U.S. Treasury (OFAC) regulations already address a wide array of financial transactions and other conduct, irrespective of who owns Arm. Similarly, the ownership of Arm has no impact on U.S. export controls—what matters is where the technology is developed and the nationality of those that develop it, not who owns the company that created it.

Even today, Arm technology already has some U.S. content, as Arm already has US, and U.S.-based, R&D engineers and has for many years. Nonetheless, Arm tracks and controls the amount of U.S. content in each of Arm’s new products, and for most (but not all) of Arm’s products, the amount of U.S. content is comfortably below the threshold that would subject those products to U.S. export controls.

After the merger, as we work with NVIDIA to develop new products, expand Arm’s offerings, and accelerate Arm’s roadmap, we expect that Arm’s new products developed in the UK will remain overwhelmingly UK-origin and therefore not subject to U.S. export controls. Arm expects to utilize NVIDIA’s IP to enhance our product offering and we will need to carefully monitor the levels of US content to ensure that we continue to adhere to export control regulations globally.

As a result, we have every confidence that the merger will not significantly affect Arm’s ability to provide Arm technology to our customer base anywhere in the world.

Conclusion

Arm’s objective is to lead the next wave of technology innovation, and we believe that becoming part of NVIDIA will increase our chance of success. This proposed investment by NVIDIA is a huge opportunity for the United Kingdom, and our plans for partnership are in the best tradition of transatlantic cooperation for mutual benefit.

I hope this has helped answer your questions. I would be happy to answer any further questions you might have.

I am happy for this letter to be placed in the public domain.

Best wishes,

Simon Segars CEO, Arm Ltd.

October 2020