Nvidia may abandon the acquisition of chip design company Arm. The transaction may have to be terminated due to intense scrutiny from regulators and opposition from related companies. At this point, it had been nearly a year and a half since Nvidia had originally announced its acquisition of Arm.
(Source: NVIDIA)
Nvidia had anticipated the arrival of the regulatory investigation and expected the deal to take 18 months to complete, which means it believes the review will end by March 2022. But for now, it seems that this time may continue to be extended.
Japan's SoftBank Group, Arm's owner, is also planning another option, which is to re-list Arm through an initial public offering (IPO).
It is understood that SoftBank officially acquired Arm at a cost of $31 billion in September 2016, when Arm's market value was $22 billion, and Arm was delisted after the acquisition was completed.
In September 2020, Nvidia announced that it would acquire Arm for $40 billion.
As for why after just a few years, SoftBank considered selling Arm, it is understood that first, due to SoftBank's own operating losses, it is in urgent need of funds; in addition, because Arm continues to increase investment in research and development, profitability has been low, and it has been unable to obtain high profits.
Arm has a strong presence in chip design. The company's chip designs span hundreds of billions of devices, including automotive, wearable and medical devices, smart home products, smartphone and laptop processors, and more. Its low-power and efficient chips are changing the way computing is done around the world.
It is worth mentioning that Arm has always adopted a neutral policy, licensing its technology to companies around the world that have different competitive relationships, including Apple, Qualcomm and Samsung.
Therefore, Arm's control is a huge problem, and its ownership will affect the future of the technology company landscape to some extent. If the acquisition between Nvidia and Arm is concluded, it could affect Arm's future product development and specifically interfere with which companies Arm licenses designs to and at what price.
The deal was scrutinized by the Federal Trade Commission (FTC), the Competition and Markets Authority (CMA), and the European Union. Big tech companies such as Google, Microsoft, Qualcomm and Tesla have also objected to the deal.
Regulators fear that arm's neutral stance will cease to exist after the acquisition is completed, and it will be more inclined to align with Nvidia's interests than the broader Arm ecosystem. This could prevent Arm from designing more powerful chips for Nvidia's competitors, thereby stifling technological innovation and advancements.
In addition to the impact on NVIDIA's competitors, regulators also mentioned that the acquisition will also affect consumers. The current global shortage of chips has made it difficult to buy certain goods, and if Nvidia uses Arm to give it special treatment, it may reduce the performance and cost of chips.
The FTC also emphasized that Nvidia can even access Arm's customer list and understand the sensitive information that competitors share with Arm, which will fundamentally upend Arm's position as a neutral partner. It also noted that companies competing with NVIDIA may not be willing to help further improve Arm's technology.
The UK's CMA, after completing the first phase of investigation into the deal in August 2021, launched a second phase of a more in-depth investigation in November of the same year to scrutinize the potential national security risks and competition issues associated with the acquisition.
Margrethe Vestager, executive vice president of the European Union, said, "Nvidia's acquisition of Arm could make it harder for other manufacturers to access Arm's technology, thereby causing damage to the semiconductor industry." ”
In addition to investigating the possible unfairness of Nvidia's acquisition of Arm, the EU also plans to investigate "how the deal affects the way competitors share information with Arm" and whether Nvidia will adjust Arm's R&D funding to make its products more commercial, thereby harming companies and consumers using Arm's technology.
(Source: Pixabay)
Regarding the concerns and questions raised by regulators, Jensen Huang, CEO of Nvidia, said, "The concerns will not occur, and we remain committed to maintaining Arm's open licensing model and will not restrict or deny Arm products to any customer." ”
At the same time, Nvidia submitted solutions to some of these issues in an attempt to reassure regulators, including spinning off an independent company to license Arm's design patents.
Nvidia also said that "the acquisition of Arm will promote competition, create more opportunities for other companies, and expand Arm's ecosystem."
Despite Nvidia's various commitments, regulators believe they are "not sufficient to definitively dispel its serious concerns about the effectiveness of the deal."
In addition, it is understood that the deadline for SoftBank to obtain regulatory approval from Nvidia is the end of 2022. Perhaps, regulators only need to hold out long enough for Nvidia to abandon the deal.
Recently, there is also relevant news that Nvidia revealed to partners that it has no expectations that the transaction can pass. However, it subsequently denied it and said that Nvidia and SoftBank remain committed to facilitating the acquisition.
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reference:
https://www.theverge.com/2022/1/25/22900456/nvidia-Arm-acquisition-deal-trouble-regulator-worries-report
https://www.theverge.com/2021/12/9/22826293/nvidia-Arm-acquisition-ftc-case-antitrust-chips-semiconductor-lawsuit