‘It would be a tragedy if ARM did not move into the new era’

Jensen Huang, founder of Nvidia, says his controversial move for the UK chip designer will secure its future

by Jamie Nimmo

July 4, 2021

Almost fifty years on, the image is still etched into Jensen Huang’s memory.

Thailand, where the Taiwanese-American billionaire boss of chip giant Nvidia lived as a child, was in the grip of a civil war as the government fought the Communist uprising.

“It was surreal because tanks were rolling down the streets. The same streets you go to school along, tanks are rolling down,” he recalls over video call. “People are shooting at each other, grenades are going off. It’s a full-on battle.”

It is a long way from his California mansion, from where the chief executive of the world’s largest semiconductor company is leading a battle of his own. Huang must convince governments and regulators to approve his $40 billion (£30 billion) takeover of Cambridge-based chip designer ARM, often referred to as the “crown jewel” of Britain’s technology industry, which is being sold by Japanese investment firm SoftBank.

ARM has found itself in a geopolitical tug of war between the US and China as they fight for technological supremacy. The prospect of a US owner of a critical supplier to Chinese smartphone makers, including Huawei, which was blacklisted by Donald Trump, has Beijing on edge.

In April, digital secretary Oliver Dowden ordered an inquiry into the deal on national security and competition grounds. The competition watchdog is to deliver its findings within weeks to the government, which will then decide whether to approve the deal, ask for remedies or launch an investigation.

The odds look stacked against Huang; an analyst at Citi put the chances of the acquisition’s success at 10 per cent after Dowden’s intervention. Huang — a self-made tycoon worth an estimated $18.9 billion, according to Forbes magazine — has come out fighting to salvage the deal.

Since being bought by SoftBank for £24 billion in 2016 — just after the Brexit vote — ARM’s growth has flatlined. The explosion of smartphones, where it had focused its efforts, has stalled, now that almost everyone has a phone and the devices are being replaced less often.

Huang wants to push ARM towards artificial intelligence (AI) and cloud computing. That is going to require huge sums of money — but Nvidia has deep pockets. “They need to invest in new technologies like AI and software that is not in its core wheelhouse today,” says Huang. “I think it would be a terrible tragedy, frankly, for ARM to not have the benefit of this insurgence of technology and investment so that it would go into the next era of computing, of AI, with the same vibrancy that it had in the mobile computing world.

“Very few technology companies succeeded and stayed vibrant through multiple eras of computing, and ARM is right at that juncture. This period is really a very delicate time for them.”

Nvidia’s rivals, and ARM customers such as Qualcomm, Google and Microsoft, were quick to voice their concerns about the deal. They believe that Nvidia, a graphics chip-maker that has shifted its focus from video games to AI, could restrict the supply of ARM’s designs for its own benefit or even raise prices. ARM licences its technology to about 500 chip-makers.

“The vast majority of customers I’ve spoken to know we’ll make the technology better”

Huang, 58, says that Nvidia will not change ARM’s model. “The vast majority of the customers I’ve spoken to are supportive of what we’re trying to do because they know that we’ll make the ARM technology better. Infusion of Nvidia’s scale, infusion of R&D [research and development] and infusion of technology will make ARM better. A stronger ARM is great for the entire ecosystem.”

The takeover has divided the tech world. Last week, The Sunday Times revealed that three of ARM’s biggest customers — Broadcom, MediaTek and Marvell — had come out in support of Nvidia’s pursuit, prompting the Citi analyst to raise the chances of success to 30 per cent.

The support of a few customers might not be enough to win over regulators in Beijing. China, where ARM has a joint venture with Chinese private equity firm Hopu Investments as per Chinese rules, fears that if it became a US-owned company, President Biden could cut off supply of its technology to smartphone makers such as Huawei.

Some believe that if China blocks the deal in its own country, Nvidia could even call the whole thing off because of the size of the market and its importance to the overall company (ARM’s sales in China were reported to have been about $500 million in 2019). Nvidia and ARM argue that most of its tech is made outside the US. Huang says he is “confident” that regulators will pass the deal.

As part of his charm offensive, Huang has pledged to increase jobs at ARM’s base in Cambridge and invest $100 million to build Britain’s largest supercomputer and an AI lab. Still, the battle for ARM is a reminder of what could have been; its takeover has been seen as an indictment of the UK’s inability to grow its tech stars into global titans.

“This is the golden age of AI in the UK — we’re going to go invest there,” he says, aiming to dispel suggestions that he will strip the company for Nvidia’s benefit.

Huang, sporting his new lockdown locks and orange shades, is among a group of American billionaires with rockstar followings. But it was not always that way. Born in Taiwan, he moved as a child to Thailand, where his father, a chemical engineer, worked at an oil refinery. His parents saved up to send Huang (real name Jen-Hsun) and his brother away from the conflict and to the US, before joining them there two years later.

Huang, who leapfrogged two years at a Baptist school in Kentucky, was a gifted but shy child. He recalls: “When I was in high school, I only had a few friends. We were all in the same three clubs: the math club, the computer club and the science club. We mostly sat around to do homework and play games. After school, we would go to the arcades to play some more games and also write some more game programs.”

A job at Denny’s, the American diner chain, helped him become less introverted. “If you gave me a choice between staying home and doing homework versus going out, I’d just stay at home … so it was a great way to get me out.”

Matt Murphy, chief executive of Marvell, describes Huang as an “industry legend” who, unlike other Silicon Valley tycoons, has managed “not to grow a huge ego”. “He’s a very normal, down-to earth person, but he’s brilliant and thinks ten steps ahead,” says Murphy.

It was at a Denny’s in California, on his 30th birthday in 1993, that Huang and two electrical-engineer friends cooked up the idea to create Nvidia. They invested $40,000 of their own money to produce improved computer graphics for video games. The bet paid off handsomely. The company received venture capital backing and floated on Nasdaq in 1999. A $1,000 investment at the time would now be worth about $800,000. The company is now valued at $500 billion, making it the largest chip-maker in the world.

The stock took off around 2016 when it shifted the focus of its graphics processing units (GPUs) from video games to AI. Its chips are now used by tech giants in data centres and by car-makers around the world to help driverless cars to navigate. Huang has previously described GPUs as a computer’s “soul” to the central processing unit’s (CPU’s) “brain”, which is what ARM designs. However, the share price surge had one drawback for Huang: he had promised to get a tattoo of the company’s eye logo on his arm if it passed $100 — and he stuck to his word.

If embarking on the biggest deal in semiconductor history was not enough, Huang has also had to handle a global chip shortage. The problems have been caused by an array of factors: pandemic-induced supply-chain bottlenecks; the explosion in demand for TVs, games consoles and laptops; a surprise rebound in car sales; and stockpiling by Beijing.

The industry has even had to contend with a drought in Taiwan, the semiconductor capital of the world, which uses huge volumes of water to make the chips. Huang believes that car-makers will fix their problems in less than a year, but that other industries will feel the pain for “several years”.

While he admits that home-working has been tough on many of his 19,000 staff, he says it is much easier for chief executives. His children no longer live at home but he does have one added responsibility: two lockdown puppies. “All of a sudden you get reminded of what it’s like to have someone depend on you every day,” he says.

JENSEN HUANG

VITAL STATISTICS

Born: February 17, 1963
Status: married to Lori; they have a son, Spencer, 30, and daughter, Madison, 29, who lives in Knightsbridge
School: Oneida Baptist Institute, Kentucky
University: Degree in electrical engineering from Oregon State University (where he met his wife) and then a master’s at Stanford University
First job: paperboy in Oregon aged 12
Pay: $19.3 million (£14 million)
Homes: Santa Clara, California, and Maui, Hawaii, where he and Lori spent their honeymoon
Cars: “I’ve given away most of my cars” ? but he still has a Tesla Model S, a Tesla Model X, a Porsche Taycan and a Ferrari
Favourite book: Sapiens: A Brief History of Humankind, by Yuval Noah Harari
TV series: Sherlock
Music: “I haven’t listened to music since the Bee Gees”
Drink: “Scotch every night”
Gadget: Laptop
Watch: None — “I don’t care about the time”
Charity: Jen-Hsun & Lori Huang Foundation. Donated $5 million for a cancer research lab at Oregon State and $30 million to build the Jen-Hsun Huang Engineering Center at Stanford

WORKING DAY

Either Nvidia’s chief executive wakes up at 5am or his two lockdown puppies wake him at 4.30am. He works until about 5 or 6pm before having a quick dinner and drinks with Lori. Then Huang does a bit more work (and a little more eating).

DOWNTIME

He works seven days a week but spends the little downtime he has with his wife or looking after their two dogs.