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LGT Navigator: Upheavals in the chip industry

September 14, 2020

Big bang in the semiconductor industry: The American technology group Nvidia takes over the British chip specialist ARM for USD 40bn. The Japanese Softbank Group, to which ARM Holdings previously belonged, sells the British company. Nvidia and Softbank announced this on Monday night before the opening of trading.


The purchase price of ARM will amount to USD 40 bn, with USD 5 bn subject to conditions: Nvidia will pay from a mixture of money and own shares, making the Japanese technology investor Softbank one of Nvidia's largest shareholders. For Nvidia, founded in 1993, this is the most expensive takeover in the company's history. With the purchase of ARM, Nvidia is likely to remix the cards in the supplier business of portable electronic devices.

ARM plays an important role in the semiconductor industry, as the British company's technology is found in almost all smartphones, including Apple's iPhone. Its current market share is 95% for smartphone processors, 35% for digital TV solutions and 10% for other mobile computers. Although ARM itself is not a semiconductor manufacturer, but a pure chip designer, the company is well established. ARM chips are valued in the industry as energy efficient.

US inflation picking up slightly

In the US, consumer prices rose by 1.3% in August, compared with the same month last year. Expert surveys predicted an increase of 1.2%, while inflation was still 1.0% in the previous month. Thus, inflation is still below the 2.0% mark set by the US Federal Reserve. Since the Fed recently announced a change in strategy, according to which it would like to have greater leeway in targeting inflation, and since the inflation rate is allowed to remain above the 2% threshold for a longer period of time, the market is watching the central bank's behavior with interest. But so far, the Fed has not been put under pressure to act purely on the basis of the figures.

China unveils new financial regulations

China tightens its regulations and imposes capital demands on expanding conglomerates such as Ant and Evergrande in its latest attempt to dam up the risks in the financial sector. The new rules will require licenses for non-financial enterprises that do business across at least two financial sectors to apply to and get approval from the People's Bank of China to establish financial holding companies. This move aims at intensifying financial reforms and maintaining market order, according to the Chinese State Council. The new regulation takes effect on November 1 this year.



Economic Indicators September 14

MEZ Country Indicator Last
11:00 EZ Industrial Production (July, y/y) -12.6%

Earnings Calendar September 14

Country Corporate Period
US Kroger Q2


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