FTC steps in to block Nvidia’s $40B acquisition of Arm

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America’s Federal Trade Commission (FTC) has become the first regulator to sue to block Nvidia’s acquisition of British chip designer Arm.

Arm plays a critical role in the global technology supply chain with its designs used for edge AI chips and processors for smartphones, tablets, desktops, and servers.

It’s of little surprise that Nvidia wants to bring Arm under its wing and is willing to pay $40 billion (£29 billion) for it.

Global regulators, including in the UK and EU, have launched investigations into the deal due to the widespread implications.

Holly Vedova, Director of the Bureau of Competition at the FTC, said in a statement:

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies.

Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.

The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”

The complaint highlights that Nvidia already uses Arm’s designs for areas including DPU SmartNICs, CPUs for cloud computing, and advanced driving systems. The FTC is concerned that Nvidia would have an incentive to use its acquisition of Arm to limit competitors’ access to new designs.

Some of Nvidia’s rivals have offered to invest in Arm if it helps the company to remain independent.

Dr Lil Read, Analyst at GlobalData, commented:

“The Nvidia-ARM deal is on its last legs. The regulatory environment is much tougher now since Qualcomm has formed a consortium to invest in ARM.

The FTC won’t let it be – nor will the UK CMA or the EU regulator. It’s likely that even if the deal managed to clear those hurdles, Chinese regulators would throw another spanner in the works.

Tying the acquisition up for another two years is not in anyone’s interest – not Nvidia’s, and certainly not ARM’s. There could be hope for ARM if a non-chip firm recognises this opportunity for vertical integration – a trend that we increasingly see with the likes of Tesla and Apple.”

Arm founder Hermann Hauser even suggested the merger would amount to “surrendering the UK’s most powerful trade weapon to the US”.

Last month, UK Digital Secretary Nadine Dorries ordered the CMA (Competition & Markets Authority) to launch a “Phase Two” probe into the proposed merger.

As part of its ‘Phase One’ report, the CMA determined the merger has the possibility of a “substantial lessening of competition across four key markets”. Those markets are data centres, the Internet of Things, automotive, and gaming.

The CMA now has 24 weeks to conduct Phase Two of its investigation.

Nvidia, for its part, has promised to work with UK regulators to alleviate concerns. The company has already pledged to keep Arm in the UK and hire more staff.

“Arm is an incredible company and it employs some of the greatest engineering minds in the world,” said Jensen Huang, CEO of Nvidia. “But we believe we can make Arm even more incredible and take it to even higher levels.”

Today’s decision by the FTC to launch a lawsuit makes the likelihood of the merger proceeding ever more remote.

(Photo by NordWood Themes on Unsplash)

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