United States FTC Files Lawsuit to Block NVIDIA-Arm Acquisitionby Ryan Smith on December 2, 2021 7:45 PM EST
In the biggest roadblock yet to NVIDIA’s proposed acquisition of Arm, the United States Federal Trade Commission (FTC) has announced this afternoon that the regulatory body will be suing to block the merger. Citing concerns over the deal “stifling the innovation pipeline for next-generation technologies”, the FTC is moving to scuttle the $40 billion deal in order to protect the interests of the wider marketplace.
The deal with current Arm owner SoftBank was first announced in September of 2020, where at the time SoftBank had been shopping Arm around in an effort to either sell or spin-off the technology IP company. And while NVIDIA entered into the deal with bullish optimism about being able to close it without too much trouble, the company has since encountered greater political headwinds than expected due to the broad industry and regulatory discomfort with a single chip maker owning an IP supplier used by hundreds of other chip makers. The FTC, in turn, is the latest and most powerful regulatory body to move to investigate the deal – voting 4-0 to file the suit – following the European Union opening a probe into the merger earlier this fall. The
While the full FTC complaint has yet to be released, per a press release put out by the agency earlier today, the crux of the FTC’s concerns revolve around the advantage over other chip makers that NVIDIA would gain from owning Arm, and the potential for misconduct and other unfair acts against competitors that also rely on Arm’s IP. In particular, the FTC states that “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.”
To that end, the FTC’s complaint is primarily focusing on product categories where NVIDIA already sells their own Arm-based hardware. This includes Advanced Driver Assistance Systems (ADAS) for cars, Data Processing Units (DPUs) and SmartNICs, and, of course, Arm-based CPUs for servers. These are all areas where NVIDIA is an active competitor, and as the FTC believes, would provide incentive for NVIDIA to engage in unfair competition.
More interesting, perhaps, is the FTC’s final concern about the Arm acquisition: that the deal will give NVIDIA access to “competitively sensitive information of Arm’s licensees”, which NVIDIA could then abuse for their own gain. Since many of Arm’s customers/licensees are directly reliant on Arm’s core designs (as opposed to just licensing the architecture), they are also reliant on Arm to add features and make other alterations that they need for future generations of products. As a result, Arm’s customers regularly share what would be considered sensitive information with the company, which the FTC in turn believes could be abused by NVIDIA to harm rivals, such as by withholding the development of features that these rival-customers need.
NVIDIA, in turn, has announced that they will be fighting the FTC lawsuit, stating that “As we move into this next step in the FTC process, we will continue to work to demonstrate that this transaction will benefit the industry and promote competition.”
Ultimately, even if NVIDIA is successful in defending the acquisition and defeating the FTC’s lawsuit, today’s announcement means that the Arm acquisition has now been set back by at least several months. NVIDIA’s administrative trial is only scheduled to begin on August 9, 2022, almost half a year after NVIDIA initially expected the deal to close. And at this point, it’s unclear how long a trial would last – and how long it would take to render a verdict.
Source: United States Federal Trade Commission
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Marlin1975 - Thursday, December 2, 2021 - linkUnless they want to spin off a large part of their company (like video) and/or give up the ability to raise prices, give their CPUs first crack at next Gen, etc... I think this may fail.
Samus - Friday, December 3, 2021 - linkI was thinking that, but even spinning off video doesn't fix the problem of nVidia making ARM processors AND holding the IP the competition needs to make competing processors.
This is a unique situation because previous chip makers have either developed their ISA or licensed an existing ISA from another chip maker or patent holder. There is of course some precedent for a chip maker buying another for the IP (nVidia effectively did this with 3Dfx, much like Creative did to Aureal) but nothing on this scale where other vendors, hundreds in this case, were licensing that same IP.
Softbank should not be allowed to sell ARM to an existing chip maker.
Crazyeyeskillah - Tuesday, December 7, 2021 - linknvidia doesn't make chips, they design them.
supdawgwtfd - Thursday, December 9, 2021 - linkThey design, then contract TSMC/Samsung to make them, which they then sell.
pogsnet - Monday, December 20, 2021 - linkIf you want technical, then HP, Dell, etc dont make laptops then, since it is all sub con to other manufacturers
pogsnet - Monday, December 20, 2021 - linkAgree, there is conflict of interest on this area.
Dolda2000 - Thursday, December 2, 2021 - linkTo this day I fail to see what the benefit of the purchase to nVidia would be over just having an architectural license.
mode_13h - Thursday, December 2, 2021 - linkCompanies grow in multiple ways. Some of it is through "organic" growth and some of it is through acquisitions. If Nvidia is sitting on a big warchest, it makes sense for them to look at acquisitions that could propel them into new, growing markets. If you're making an acquisition for growth purposes, you also don't want the acquisition to compete much with your own products. Both of these considerations makes ARM a very tempting target for them. In fact, there probably aren't many better options for Nvidia, right now, because the acquisition has to be both something they can afford and something that's not too small to have a real impact on their revenues.
Second, if we look at the trend of big tech companies each building their own SoC, whether for mobile (Apple, Google) or cloud (Amazon, Microsoft), the best way to monetize that is to snap up ARM. Amazon is still using ARM's IP, but might never go back to buying 3rd party chips. Apple is likewise unlikely ever to use even 3rd party IP, but they still pay ARM *some* royalties. Basically, ARM is pretty much the only sure bet, in the tech industry, right now.
Tams80 - Saturday, December 4, 2021 - linkYes, but they should have seen this coming from miles off.
Despite all the drama, there never was a chance that this deal was going to be allowed to go through.
I'm not sure if it is hubris or not that has led to Nvidia trying to push it this far (though it seems likely given their history).
mode_13h - Saturday, December 4, 2021 - linkNot many mergers or acquisitions were getting blocked, in recent years. I don't blame them for trying.