UK competition watchdog raises concerns over Nvidia-Arm deal
The tech industry is split on support of the deal, with giants like Microsoft in opposition, but chipmakes including Broadcom and MediaTek supporting it
The Competition and Markets Authority (CMA) has recommended a Phase 2 investigation into Nvidia's proposed takeover of British chip designer Arm, after concluding that the deal could create problems stifle innovation in the market.
The CMA delivered its report to the Secretary of State for Digital, Culture, Media and Sports (DCMS) on 20th July, and published a summary last week. The government is expected to take a decision soon on whether the CMA should conduct an in-depth probe into the acquisition.
The CMA's report expressed concerns that the merged business would have the ability to harm the competitiveness of Nvidia's rivals by limiting their access to Arm's IP.
The watchdog is concerned that the loss of competition would ultimately result in 'foreclosure in the supply of CPUs, interconnect products, GPUs, and SoCs across several global markets, spanning the datacentre, internet-of-things, automotive, and gaming console applications'.
The effects could result in '[consumers] missing out on new products or prices going up'.
Nvidia offered a set of 'behavioural remedies' to address the CMA's concern, but the authority said the offer would not alleviate any of its concerns.
The suggestions would only result in 'considerable specification, circumvention, and monitoring and enforcement risks,' it concluded.
The CMA has therefore recommended an in-depth probe into the proposed deal on competition grounds.
Earlier this month, Bloomberg reported that the UK government was considering blocking the deal over potential national security risks. A source told the news publisher that the government is likely to a take a final decision following a deeper review of the deal.
From Tokyo to Santa Clara, via Cambridge
Japan's SoftBank owns Arm, which is headquartered in Cambridge. Nearly every smartphone maker in the world uses its chip designs - including Apple and Samsung.
In September last year, Nvidia announced that it had entered into a definite agreement with SoftBank Group to acquire Arm in a $40 billion transaction.
The American firm promised that Arm would operate as a separate division after completion of the deal. Nvidia added that it would provide support for Arm's R&D efforts, as well as access to the company's entire suite of products.
Because Nvidia is an Arm licensee, the deal triggered alarm among other licensees, who were worried about the potential impact on Arm's position as a neutral supplier.
Tech firms like Google, Microsoft, Amazon and Graphcore are alleged to have written to the CMA, asking for the deal to be blocked. Some of Nvidia's competitors are ready to invest in Arm, if Nvidia isn't allowed to acquire it, although Broadcom, Marvell and MediaTek have said they support the takeover deal.
Earlier this year, the CMA invited views on the impact of the deal on competition in the UK. In April, digital secretary Oliver Dowden issued an intervention notice instructing the CMA to review any potential security implications, as well as jurisdictional and competition issues posed by the deal.
Last week, Nvidia CEO Jensen Huang admitted for the first time that the company's proposed takeover of Arm may take longer than the initially-scheduled 18 months.
"Our discussions with regulators are taking longer than initially thought, so it's pushing out the timetable," Huang told The Financial Times.
"It's not one particular delay. But we're confident in the deal, we're confident regulators should recognise the benefits of the acquisition."