Daily Management Review

UK Regulator Raises Anti-Competition Concerns Of Nvidia's $40 Bln Acquisition Of ARM


UK Regulator Raises Anti-Competition Concerns Of Nvidia's $40 Bln Acquisition Of ARM
The conclusion of a regulator of the United Kingdom that the proposed $40 billion acquisition of British chip designer ARM by Nvidia Corp that the deal could reduce competition and weaken rivals was a huge blow to both the companies. The regulator also recommended a detailed investigation into the details of the possible fallout of the deal.
There was a backlash against the deal from politicians, rivals and customers in the UK since the announcement of the acquisition Britain's most important technology company by the world's biggest maker of graphics and AI chips back in September last year.
The issue has also assumed a political angle in the UK as those opposing the deal argued in favour of a rise in economic nationalism and greater awareness of the need for the UK to have ownership of some of the key infrastructure means ARM, which is currently owned by Japan's SoftBank since 2016, and the company should not be sold again.
Those arguments were given support by Britain's competition regulator as it said that competition in markets around the world in the chip industry could be reduced by the new merged entity resulting from the acquisition. The regulator said that sectors such as data centres, the internet-of-things, automotives and gaming could see a significant reduction in competition.
A disposal or sale of the part of the merged business that has the power to harm rivals is generally required for any deal that has serious competition implications to be passed by antitrust regulators around the world. However, the whole business resulting from the ARM and Nvidia could pose a threat to competition globally, said the regulator.
There was were also concerns about the deal since it is believed to pose a threat to innovation in industries that are considered to be the backbone of modern economies.
"We're concerned that Nvidia controlling ARM could create real problems for Nvidia's rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets," said Andrea Coscelli, head of Competition and Markets Authority.
The semiconductor industry is central and fundamental to technologies from artificial intelligence and quantum computing to 5G telecoms networks and ARM is a major player in this sector globally. Almost all the smartphone and millions of other devices run on chips that are designed by ARM.
Critical infrastructure in Britain is also underpinned by semiconductors and such infrastructure is related to technology related to defence and national security matters, the government has said.
There is also widespread discontent in the global semiconductor industry of the deal wherein ARM has for long been seen as a neutral player that licenses its key intellectual property to customers who are otherwise intense rivals such as Qualcomm Inc, Samsung Electronics Co Ltd and Apple Inc.
There are concerns among chip makers about access to Arm's innovations being given first to Nvidia instead of the long standing trend of distributing thee innovations among the entire industry on an equal basis.