Nvidia’s ARM Purchase Raises ‘Significant Competition Concerns’ – CMA

Serious competition concerns means Nvidia’s proposed acquisition of ARM Holdings could now face an indepth investigation, further delaying any deal.

The UK competition regulator, the Competition and Markets Authority (CMA), said late last week that it was concerned that the merged entity will restrict access of Nvidia’s rivals to ARM’s vital Intellectual Property (IP).

The CMS also revealed in its “executive summary” that it has “received a substantial number of detailed and reasoned submissions from customers and competitors raising concerns in numerous markets,” about the deal.

Significant concerns

“After careful examination, the CMA found significant competition concerns associated with the merged business’ ability and incentive to harm the competitiveness of Nvidia’s rivals (that is, to ‘foreclose’) by restricting access to Arm’s CPU IP and impairing interoperability between related products, so as to benefit Nvidia’s downstream activities and increase its profits,” said the CMA.

The CMA also found “significant competition concerns as a result of the effect of such foreclosure in the supply of CPUs, interconnect products, GPUs, and SoCs across several global markets, spanning the data centre, internet-of-things, automotive and gaming console applications.”

It said the foreclosure strategies identified could lead to “a realistic prospect of a substantial lessening of competition (SLC), and consequently to a stifling of innovation, and more expensive or lower quality products.”

It noted that Nvidia has offered “a set of behavioural remedies seeking to address the CMA’s concerns.”

However the CMA “found the offer to present considerable specification, circumvention, and monitoring and enforcement risks.”

So what is next?

Well, it is now up to UK secretary of state of digital, culture, media and sport (DCMS), Oliver Dowden.

He now has to decide whether the merger should be referred for an in-depth phase two investigation on both national security and competition grounds only.

“We have received the CMA’s phase one report and the Digital Secretary will make a decision on whether to proceed to the next phase of the investigation in due course,” a DCMS spokesperson told Silicon UK.

Regulatory concerns

In January 2021 the CMA had confirmed it would investigate Nvidia’s acquisition of ARM Holdings.

And because of the global importance of ARM, in addition to the British CMA probe, the European Commission and the US Federal Trade Commission (FTC) have also launched their own probes into the matter.

Even China’s State Market Regulatory Administration is investigating the proposed deal.

In April this year, the British government responded to the global pressure, and issued a ‘public interest intervention notice’ over ARM’s sale, citing national security implications.

Unpopular acquisition

It is fair to say that the deal has been opposed by most of the tech industry, ever since September 2020, when after months of rumours, it was announced that Cambridge-based ARM was to be sold to Nvidia for a hefty $40 billion (£28.5bn).

ARM designs power 95 percent of the world’s smartphones, and many in the tech sector are concerned at ARM’s sale to a single chip supplier could give Nvidia too much leverage in the market.

The acquisition has also been opposed by one of ARM founders, Tudor Brown, as well as Hermann Hauser (involved in the development of the first ARM processor when it was part of Acorn).

Both men said the company should not be sold to a semiconductor firm, but should remain a neutral supplier to the industry.

It should be remembered however that Japan’s SoftBank had acquired ARM for $32bn in 2016, which also prompted political concern in the UK at the time, with politicians urging the government to step in to ensure that ARM remained headquartered in Cambridge.

The tech industry remains concerned at the proposed acquisition by Nvidia however, which is being opposed by tech giants such as Alphabet, Microsoft, and Qualcomm.

Google, Microsoft and Qualcomm all manufacturer their own inhouse processors, and depend upon ARM chip designs.

However in early July ARM’s CEO, Simon Segars, strongly defended the deal, and said it was the best outcome for the British chip designer, and was a better solution than an IPO.