Nvidia & Softbank abandon $40 billion Arm deal citing regulatory challenges

• Nvidia announced its plans to buy chip designer Arm from Softbank in September 2020 

• Global regulators have since then raised questions regarding the proposed deal

Nvidia Corp. (NASDAQ: NVDA) and Japan’s SoftBank Group Corp. have called off their $40 billion deal to buy semiconductor chip designer Arm from the Japanese bank. 

In a joint statement, issued on Tuesday, the two companies cited “significant regulatory challenges” as the reason for abandoning the deal.

The acquisition, which was poised to become the biggest semiconductor deal in history, has faced intense scrutiny from regulators worldwide since its announcement.

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In September 2020, Nvidia announced a $40 billion, cash-and-stock deal, to buy influential chip designer Arm from Japanese owner Softbank. Regulators and chip-making rivals raised questions regarding the proposed deal. 

Hindered by global regulators

Last October, the European Commission opened an in-depth probe against the deal, saying the “transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.”

Britain’s competition regulators are probing the agreement over concerns that it would threaten national security, as Arm’s energy-efficient chip architectures are used in 95% of the semiconductors designed in China, and almost all of it is used on smartphones globally.

The Federal Trade Commission in December sued to block the transaction, alleging it would give Nvidia unlawful control over computing technology and designs that rivals need to develop their own competing chips.

Not the first overthrow

This isn’t the first chip deal that has been struck down due to regulatory obstructions. In 2018, the U.S. prevented the takeover of chip giant Qualcomm in a $117 billion takeover by Broadcom Inc., on national-security grounds. 

The very same year, Qualcomm’s $44 billion purchase of Dutch chipmaker NXP Semiconductors NV couldn’t move forward after Chinese regulators did not approve of the deal

Arm has since announced that its next step would be going public. Its parent company Softbank will also receive a $1.25 billion breakup fee from Nvidia as a result of the deal not going ahead.

Also Read: Nvidia preparing to abandon $40-billion Arm acquisition deal

Picture Credits: Nvidia