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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Over 160 billion chips have been made for various devices based on designs from Arm. In recent years, the company has added AI accelerator chips to its lineup for neural network processing.

In the wake of the proposed acquisition, Nvidia CEO Jensen Huang said:

“ARM is an incredible company and it employs some of the greatest engineering minds in the world. But we believe we can make ARM even more incredible and take it to even higher levels.

We want to propel it — and the UK — to global AI leadership.”

Given the size of the acquisition and potential impact, UK Culture Secretary Oliver Dowden referred the deal to the Competition and Markets Authority (CMA) and asked the regulator to prepare a report on whether the deal is anti-competitive.

To squash job loss concerns and avoid regulators blocking the deal, Nvidia promised to keep the business in the UK and even hire more staff.

Nvidia also announced a new AI centre in Cambridge –  home to an increasing number of leading startups in the field such as FiveAI, Prowler.io, Fetch.ai, and Darktrace – that features an ARM/Nvidia-based supercomputer, set to be one of the most powerful in the world.

However, it seems that it’s not economic concerns that could see the deal blocked.

The CMA’s report highlighted national security concerns and the UK is therefore likely to reject the acquisition. A deeper investigation is set to be launched before any final decision is made, but the deal looks to be a long shot.

“We continue to work through the regulatory process with the U.K. government,” said an Nvidia spokesperson in a statement. “We look forward to their questions and expect to resolve any issues they may have.”

If the acquisition is granted permission to proceed, it will likely come with strict conditions.

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

(Photo by Markus Winkler on Unsplash)

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