The US Federal Trade Commission (FTC) has filed a lawsuit against graphics card giant Nvidia to block its deal to purchase ARM. Before we take a look at why FTC‘s doing it, a quick recap of what has happened till now.
Nvidia’s bid for ARM
Last September, Nvidia announced it’s planning to buy the chip design firm for $40 billion. The US-based company said at that time, the purchase ties into its plans of bolstering its AI efforts. As ARM’s shares have risen since that, the UK-based company might be worth a whopping $80 billion now.
Before this deal was announced, ARM’s then-owner, Softbank, was considering an Initial Public Offering (IPO) for the company with a speculated valuation of $40 billion. The Japanese conglomerate bought ARM for $32 billion.
Investigations and industry impact
Nvidia’s transaction was slotted to be completed in 18 months, but because of several ongoing investigations and regulatory roadblocks, the deal hangs in the balance.
In October, the European Commission opened up an investigation as it was concerned that the deal “could lead to higher prices, less choice and reduced innovation in the semiconductor industry.”
In a statement, Executive Vice-President Margrethe Vestager, said:
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 datacentres, automotive and in the Internet of Things. 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.
Last month, UK’s Digital and Culture Secretary, Nadine Dorries, ordered a phase-2 probe into the deal to investigate matters of antitrust and national security implications.
US-based chip giant Qualcomm had objected to this deal in February, reportedly telling the regulators across the world that Nvidia might become a gatekeeper for ARM’s technologies.
A report by Reuters in September quoted multiple industry sources, who thought the deal might face stern opposition. ARM’s design for chips is used by multiple tech companies — including Apple, Google, Samsung, and Qualcomm. And while Nvidia’s assured them of not stifling the innovation, there might be a lot of concerns coming from these firms.
What is the FTC doing?
The FTC had first opened up a probe into the deal back in February. In November, a Bloomberg report noted that the new FTC chair Lina Khan had been in talks with her UK counterparts, discussing the merger regularly.
