NVIDIA’s (NVDA) Acquisition of Arm Ltd. Hits Another Roadblock as UK’s CMA Flags Serious Competition Concerns


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NVIDIA (NASDAQ:NVDA), the leading designer of graphic cards, continues to face substantial regulatory resistance when it comes to the consummation of its planned acquisition of the British chip designer, Arm Ltd.

According to a statement released by UK’s Competition and Markets Authority (CMA), the deal entails serious competition concerns:

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“Should the deal go ahead, the CMA is concerned that the merged business would have the ability and incentive to harm the competitiveness of NVIDIA’s rivals by restricting access to Arm’s intellectual property (IP). Arm’s IP is used by companies that produce semiconductor chips and related products, in competition with NVIDIA.”

The CMA went on to note that the reduced competition could “stifle innovation across a number of markets, including data centers, gaming, the internet of things, and self-driving cars.”

While conceding that NVIDIA has offered a behavioral remedy to counter competition concerns, the CMA concluded that an in-depth phase 2 investigation is now warranted.

Readers should note that NVIDIA has to close the Arm acquisition deal by September 2022. Otherwise, Japan’s SoftBank Group, which currently owns Arm, will win the right to retain $1.25 billion as a breakup fee. Bear in mind that NVIDIA has already paid this amount to SoftBank as a down payment.

We had noted in a previous post that SoftBank might opt for an Arm IPO if the NVIDIA deal falls through. As per the details revealed by The Telegraph, the Japanese tech giant is mulling New York as the most likely venue for Arm’s public flotation:

“… sources close to the parties said that if delays and competition hurdles prove insurmountable, a stock market float remains under consideration. New York is viewed as the most likely venue, although one source said no formal process is underway.”

Meanwhile, NVIDIA is also facing hurdles in China, where Huawei Technologies Ltd. has reportedly raised concerns that its access to Arm’s IP might be hampered by the deal.

As a refresher, ARM designs silicon chips and licenses instruction sets that govern how chips communicate. Moreover, ARM’s intellectual property – including the company's Reduced Instruction Set Computing (RISC) Instruction Set Architecture (ISA) – is utilized by the likes of Apple, Qualcomm, Samsung, and Huawei for their smartphone chips, thereby corresponding to a market coverage of around 90 percent.

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