EU Opens Investigation into Nvidia’s Arm Acquisition
The European Commission has opened a formal competition investigation into Nvidia’s acquisition of chip designer Arm. The deal, which would see Nvidia purchase the UK-based company from SoftBank for $40 billion, was announced in September 2020.
In a press release, the EU’s Executive Vice President Margrethe Vestager said that Nvidia buying Arm could make it harder for other manufacturers to access Arm’s technology, hurting much of the semiconductor industry (which is already facing supply problems).
The Commission said in a statement late on Wednesday that the merged entity would have the ability and incentive to restrict access by Nvidia’s rivals to Arm’s technology, and that the proposed transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.
Some of the major concerns regarding the acquisition is Arm’s neutrality. Arm licenses its chip designs to a broad range of companies including Apple, Samsung, and Qualcomm, many of which compete with one another and Nvidia. There are fears that having Nvidia control Arm may result in Nvidia’s competitors being put at a disadvantage.
The EU also plans on investigating how the deal could affect how competitors share information with Arm, and whether Nvidia could change Arm’s research and development funding to make its products more profitable, to the detriment of those that use Arm’s other tech.
Margrethe Vestager, Executive Vice-President and responsible for competition policy stated, “While Arm and Nvidia do not directly compete, Arm’s IP is an important input in products competing with those of Nvidia, for example in data centres, automotive and in Internet of Things (IoTs). Our analysis shows that the acquisition of Arm by Nvidia could lead to restricted or degraded access to Arm’s IP, with distortive effects in many markets where semiconductors are used.”
Nvidia’s CEO Jensen Huang says the acquisition won’t affect Arm’s license policy and has committed to maintaining Arm’s open licensing model. But critics of the deal fear that regulators won’t be able to force Nvidia to remain neutral indefinitely.
According to the EU’s press release, Nvidia submitted commitments to try to address some of these concerns, but the commission decided they were “insufficient to clearly dismiss its serious doubts as to the effect of the transaction.”
Both Nvidia and Arm have been expecting regulatory investigations like this and anticipate that the deal could take 18 months to complete. The EU’s investigation is unlikely to be the only regulatory scrutiny the deal faces either. The UK’s Competition and Markets Authority recommended its own in-depth investigation in August, after asking third parties to comment on the merger.