Nvidia has allegedly come to the realization it has bitten more than it can chew with the acquisition of Arm and is abandoning the deal.
Nvidia made headlines when it announced it would acquire Arm, a chip designing firm. The deal was valued at $40 billion and would have consolidated Nvidia’s control of the chip market. However, the proposed deal immediately faced intense scrutiny from regulators and Nvidia’s competitors. It made Nvidia adjust its timeline for concluding the purchase.
However, according to a report by Bloomberg, both Nvidia and Arm are having second thoughts about the deal. Nvidia has been informing its partners that the purchase might not come through while Arm’s parent company, SoftBank, is exploring the option of taking Arm public, which would still help it get rid of the business.
Arm, according to parties opposed to the deal, is too valuable as the biggest silicon chip designer to be owned by one of the companies making chips. Nvidia licenses Arm’s tech in many areas, and giving total control to Nvidia will give it an unfair advantage in the markets. Moreover, Arm is best left as a neutral party in the industry as it has the trade secrets of many companies in its care.
Nvidia promised not to interfere in how Arm currently operates but its assurances have not been enough. The concern is that over time, Arm’s interest will gradually align with that of Nvidia in case the deal is allowed to stand. This will only hurt the tech industry in the long run due to abuse of monopoly.
Regulatory bodies in the UK, EU, and the US have decided to weigh in on the matter. The US Federal Trade Commission, FTC, has even sued to prevent the acquisition. The case is set for May and will definitely stretch the timeline for the acquisition. At the time, the FTC wrote, “The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies. Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals. The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”
Arm is a British company that licenses designs for other companies to design their microprocessors and other semiconductors. The company is so influential that it estimates its technology appears in more than 25 billion chips every year.
Even if Nvidia manages to scale the opposition in the West, it still has to reckon with opposition from China. The company expects China to deeply scrutinize the deal anyway, just like the nation did when US-based Qualcomm attempted to take over NXP Semiconductors in a deal worth $44 billion. The deal was scuttled and eventually abandoned due to objection.
However, Nvidia and SoftBank are apparently keeping up appearances by publicly hoping the deal goes through while looking for a way forward separately.
Softbank said in a statement to Bloomberg News; “We remain hopeful that the transaction will be approved. We continue to hold the views expressed in detail in our latest regulatory filings — that this transaction provides an opportunity to accelerate Arm and boost competition and innovation.”