The purchase of ARM by NVIDIA is in serious danger following the filing of a blockade lawsuit from the powerful US Federal Trade Commission (FTC). It is not the first regulator to express its concern about this acquisition, but it is undoubtedly the most relevant.
The FTC makes well-known arguments, shared by most other regulators and (almost) anyone who knows the market situation and the importance of ARM in today’s technology. With the purchase of ARM, NVIDIA would achieve the absolute control over technology and designs used by billions of devices from hundreds of manufacturers, most of them competitors to NVIDIA itself.
«The proposed merger would give NVIDIA the ability and incentive to use its control of this technology to undermine your competitors, reducing competition and would ultimately result in lower product quality, less innovation, higher prices and fewer options, hurting the millions of Americans who benefit from ARM-based products«Says the FTC in a release.
The FTC also alleges that the acquisition would seriously harm competition. by giving NVIDIA access to sensitive competitive information from ARM licensees, some of which are direct rivals and would further reduce ARM’s incentive to pursue innovations that would conflict with NVIDIA’s business interests.
The decision to present the blockade suit has been unanimous, which is not very common. Both the two Democrats, as well as the two Republicans who run the regulator, agreed to the lawsuit, mentioning that the agreement would give NVIDIA an unfair advantage. The statement of the director of the Office of Competition of the FTC, Holly Vedova, goes along the same lines:
«The FTC is filing this lawsuit to block the largest merger in history between semiconductor manufacturers and prevent that conglomerate from stifling the line of innovation for next-generation technologies. Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. NVIDIA’s purchase of ARM would distort ARM’s incentives and allow the combined company 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.«Vedova stressed in the announcement of a lawsuit that puts this purchase operation at serious risk.
Are users interested in purchasing ARM?
We share the FTC’s arguments from start to finish and in our humble opinion purchase of ARM should not be allowed. Not by NVIDIA, but by any other great technology company with direct interests and competitors.
It is a fabulous sum of giants that not a few fear. And not without reason. Since the first rumors of acquisition in the summer of 2020, in multiple areas the potential monopoly and anti-competitive issues raised by this type of operations in general have been put on the table, and that in the case of ARM they reach their maximum exponent.
It must be remembered that ARM Holdings is today a essential company for the technology industry. It has licensing agreements with hundreds of manufacturers and its architecture designs are present in billions of devices, in 100% of smartphones sold on the planet, but also in other mobile devices such as tablets or wearables, embedded devices, personal computers. and even servers for data centers.
The importance of the architecture and the licenses mentioned are the explanation that a company that does not produce or sell any product have such an impressive appraisal. Japanese conglomerate Softbank paid a whopping $ 32 billion to acquire ARM Holdings in 2016, and NVIDIA upped the ante by offering $ 40 billion.
Although NVIDIA CEO and co-founder Jensen Huang has gone to great lengths to ensure that ARM would remain independent and headquartered in the UK, There are many who think that the neutrality necessary for a company that provides an essential service to hundreds of manufacturers, would not be guaranteed in the hands of NVIDIA. And we repeat ourselves, in no other great technology.
In a statement to The Wall Street Journal, NVIDIA has commented that “As we move through this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition.«.
The FTC plans to hold the court hearing beginning in August 2022. NVIDIA has time to prepare a defense against this lawsuit, although other regulators may join in before trial. The European Union opened a formal investigation into this operation last month, before the UK government did, citing “national security” concerns. The soap opera will continue, but the purchase of ARM by NVIDIA is at risk.