Nvidia-ARM’s $ 40 billion deal could hurt competition, requires lengthy investigation: UK regulator

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Nvidia planned to take over the British chip designer ARM for $ 40 billion on Friday.

The deal struck in September last year for Britain’s top technology company by the world’s largest manufacturer of graphics and AI chips sparked a quick backlash from politicians, competitors and customers.

In the UK, it’s also politically charged, with critics arguing that increasing economic nationalism and greater awareness of the need to own critical infrastructure are causing ARM, which has been owned by Japan’s SoftBank since 2016, to stop selling should.

On Friday, the UK competition authority increased the pressure, saying the merged company could reduce competition in markets around the world and in sectors as large as data centers, Internet of Things, automobiles and games.

In order to conclude an agreement with severe competition effects, the regulator would normally require the divestment of that part of the merged business that has the power to harm competitors. But ARM and Nvidia worries stretch across the board.

The deal also raised the alarm as it poses a threat to innovation in industries that form the backbone of modern economies.

“We fear that Nvidia, which controls ARM, could cause real problems for Nvidia’s competitors by restricting their access to key technologies and ultimately stifling innovation in a number of important and growing markets,” said Andrea Coscelli, head of the competition and market regulator .

Powerful combination

ARM is a major player in the global semiconductor industry, a sector fundamental to technologies from artificial intelligence and quantum computing to 5G telecommunications networks. His designs power almost every smartphone and millions of other devices.

Semiconductors also underpin the UK’s critical infrastructure, and the government has said they are in the technology related to defense and national security matters.

The deal also sparked anger in the semiconductor industry, where Arm has long been a neutral player licensing key intellectual property to customers who are otherwise strong competitors, including Qualcomm, Samsung Electronics, and Apple.

The fear of the chip companies is that Nvidia will gain access to Arm’s innovations at an early stage instead of distributing them equally to the entire industry.

While Nvidia had offered remedial measures to mitigate the effects, the UK regulator didn’t think it would address its concerns.

Nvidia, which had hoped to close the deal by March next year, said on Wednesday it was taking longer than expected to get the necessary approvals and some US analysts said they believe the takeover will be blocked. The deadline for the deal is September next year.

Nvidia said Friday that the deal would continue to be beneficial to the industry, and ARM’s CEO said the proposed merger would better support job creation and allow investing in the technologies of the future rather than a standalone public company to become.

The ARM sale last year came when SoftBank sold a number of other assets to reduce its debt.

The UK government will now examine the results and will provide a more detailed answer at a later date, including its reflections on possible national security implications. A full in-depth examination takes about six months.

The UK government could then block the takeover, approve it or let it go with certain obligations.

The UK has seen a record number of takeover bids this year, with private equity and publicly traded companies pounding on everything from supermarkets to pharmaceuticals to the makers of its torpedoes and submarine sensors.

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