Chinese tech firms want regulators to curb Nvidia's Arm deal

Chinese companies are worried that the deal would give Nvidia too much control over fundamental chip technology

Several Chinese technology firms, including Huawei, have approached local regulators to raise concerns over Nvidia ' s proposed acquisition of British chip and IP design company Arm Ltd.

Citing people familiar with the mater, Bloomberg News reports that Chinese companies have been urging the State Administration for Market Regulation (SAMR) to either reject the deal or impose conditions to ensure that Chinese firms are not denied access to Arm ' s technology after the deal is closed. They are worried that the deal would give Nvidia, an American firm, too much control over fundamental chip technology, and could force Arm to cut off its Chinese clients.

Last month, Nvidia announced that it had entered a definitive agreement with SoftBank Group Corp. to acquire Arm, in a $40 billion transaction.

As part of the deal, Nvidia will pay Softbank $12 billion in cash and $21.5 billion in Nvidia common stock. Softbank may also receive up to $5 billion in cash or common stock under an earn-out construct, provided Arm achieves pre-defined financial performance targets.

Arm will operate as a division of Nvidia after the deal is closed. Nvidia said the British firm will retain its headquarters in Cambridge and will "continue to operate its open-licensing model, while maintaining its global customer neutrality".

In an interview with Reuters earlier this month, Rene Haas, President of Arm's IP Products Group, said that following its takeover by Nvidia, Arm would take all necessary measures to ensure that the Nvidia ownership does not compromise Arm's relationship with its customers.

However, Chinese firms are not satisfied with Nvidia assurances and fear that Arm will become another pawn in a US-Chinese tussle over tech supremacy.

"I doubt why China would make it easy, since allowing Nvidia to take over Arm could worsen Huawei ' s access to the UK company ' s chip design," Bloomberg Intelligence analyst Anthea Lai said.

The proposed Nvidia-Arm deal was always expected to face major hurdles from regulators as well as customers, over concerns that it could limit competition and unfairly favour Arm ' s future owner.

While Chinese regulators are yet to receive a formal approval application for the deal, analysts believe that getting a clearance in China will be a big challenge for both firms.

If the Chinese government decides to approve the deal, it would likely impose condition to ensure that Chinese companies get profitable licensing terms.

In a similar deal in 2018, Qualcomm choose to relinquish its pursuit of NXP Semiconductors after it failed to win approval from Chinese regulators over 21 months.