Nvidia’s $40 billion Arm takeover bid faces in-depth EU probe

• The EU antitrust regulators have 90 working days to decide on Nvidia’s takeover deal

• The regulators and the industry is expressing concerns that Nvidia will block the Arm’s chip standards and intellectual properties, which is widely used in the sector

Nvidia Corp faced a setback on Wednesday as EU antitrust regulators have launched an “in-depth investigation” into its $40 billion acquisition bid for U.K. chip designer Arm on concerns the “transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.”

The European Commission said it would decide whether to clear or block the deal by March 15, 2022, which indicates that the deal is unlikely to be completed before the initial deadline of March 2022.

In-depth probe

“Whilst 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,” EU competition chief Margrethe Vestager said in a statement.

“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,” she added.

Earlier in August, Britain’s competition agency also started probing the deal for the country’s most important technology company after expressing concerns that it could damage competition and weaken rivals.

Also Read: Nvidia’s acquisition of chip-designer ARM faces heat by UK regulator

Other than the UK, regulators in the U.S. and China are also scrutinizing the takeover deal.

The backdrop

When the acquisition deal was announced in September 2020, the rivals and chip customers had criticized the takeover.

Qualcomm Inc and Alphabet Inc’s Google have voiced complaints that Nvidia’s control of Arm’s licenses for essential chip technology could threaten Arm’s role as a neutral partner in the industry.

However, Arm’s other customers, including Broadcom Inc, MediaTek Inc, and Marvell Technology Group Ltd, have been supportive of the transaction.

Earlier, Nvidia said it will maintain open licensing for Arm’s intellectual property, licensees, and industry, and it would work with EU regulators “to address their initial concerns and continue demonstrating that the transaction will help to accelerate Arm and boost competition and innovation, including in the EU.”

Also Read: Nvidia seeks EU approval for $54 billion worth Arm acquisition deal

Why so much scrutiny?

Arm owns the most widely used set of standards and designs in the $400 billion chip industry. Its technology is at the heart of most of the world’s smartphones and is trying to expand its role in computing, including in server machinery.

The UK based chip designer has long acted as a neutral party that sells semiconductor blueprints and licenses its standards to many major tech companies, many of whom have a market rivalry.

Arm is currently owned by Japan’s SoftBank Group Corp, which acquired the company in 2016. The previous acquisition preserved the neutrality as SoftBank’s business doesn’t overlap with the businesses of Arm’s customers.

Picture Credit: Mobile World Live