The US competition guardians want to prevent a billion-dollar deal for the chip designer ARM, whose technology is in practically all smartphones. The planned takeover of the British company by the US graphics card specialist Nvidia could slow down innovations, the competition and consumer protection authority FTC (Federal Trade Commission) justified its lawsuit.
ARM acquisition doubled in value after one year
Nvidia started buying ARM back in September 2020, which cost around $ 40 billion at the time. It’s about the largest takeover in the semiconductor industry, the value of which would have been about twice as high with the rise in the price of Nvidia shares.
The basic architecture of the chips, which are used in almost all smartphones and most tablet computers, comes from ARM. Based on the ARM designs, Apple and Samsung, among others, develop the processors for their smartphones. The chip company Qualcomm, whose chips are in many Android phones, also uses it.
The ARM architectures prevailed in smartphones against chip systems from the semiconductor giant Intel – among other things because they work significantly more energy-efficiently. Chips based on ARM designs are now also being used in data centers – and Apple is using them in its own M1 chips for its new MacBooks.
Headwind initially from ARM licensees
ARM is currently owned by the Japanese technology group Softbank, which did not shake the British company’s independence. In view of the planned takeover by Nvidia, however, there was already unrest in the technology industry. Some ARM customers such as Google, Microsoft and Qualcomm feared that the graphics card specialist might be interested in better interlinking future ARM architectures with its own products – which would worsen their competitive position. Nvidia rejected such fears.
the FTC concerns are now going in the same direction. The deal could allow Nvidia to unfairly disadvantage competitors, argued the authority. She sees the danger, among other things, with assistance systems in cars and processors for cloud services. The FTC warned of higher prices and worse products for consumers.
FTC fears loss of confidence in the industry
By buying ARM, Nvidia will also get access to confidential information from some of its competitors who are also customers of the chip designer. Usually the licensees would work with ARM on new chip designs and therefore share their plans with the British company.
Nvidia had already announced in mid-November that it was in talks with the FTC about how the authority’s concerns about the deal could be dispelled. In a first reaction to the lawsuit, Nvidia announced that it wanted to show that the takeover would strengthen competition and benefit the industry.
The EU and Great Britain are taking a closer look
In Europe, the British competition watchdogs and the EU Commission have already initiated in-depth reviews of the deal. The British are even checking Nvidia’s takeover of ARM for national security. With resistance from the FTC, the takeover could seriously falter.
The new FTC boss Lina Khan, who was chosen by US President Joe Biden, is generally expected to take a tougher pace with a view to the market power of technology companies. Amazon and Facebook have already called for them to stay out of investigations into their companies because they are biased as a critic.