US sues Nvidia over ARM deal

Business news |
By Nick Flaherty

The Federal Trade Commission in the US has sued to block the merger of Nvidia and ARM.

The proposed deal would give one of the largest chip companies control over the computing technology and designs that rival firms rely on to develop their own competing chips, it says.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said Holly Vedova, FTC Bureau of Competition Director. “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. The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”

The Commission said it had worked closely with competition authorities  in Europe, the UK, Japan and South Korea. Both the EU and the UK have announced extended investigations into the deal. There are also lawsuits around ARM China.

ARM is not commenting on the lawsuit, referring to Nvidia. “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,” said Nvidia. “Nvidia will invest in ARM’s R&D, accelerate its roadmaps, and expand its offerings in ways that boost competition, create more opportunities for all ARM licensees and expand the ARM ecosystem. Nvidia is committed to preserving ARM’s open licensing model and ensuring that its IP is available to all interested licensees, current and future.

The FTC administrative trial is scheduled for 9th August 2022 which will further extend the deal and make it less likely to succeed.

The complaint focusses on three areas: Advanced Driver Assistance Systems for passenger cars; SmartNIC interface cards in data centres; and CPUs for Cloud Computing Service Providers such as Amazon which has launched its third generation Graviton chip based on ARM cores..

The complaint also alleges that the acquisition will harm competition by giving Nvidia access to the competitively sensitive information of ARM’s licensees, some of whom are Nvidia’s rivals, and that it is likely to decrease the incentive for ARM to pursue innovations that are perceived to conflict with Nvidia’s business interests.     

The FTC says the acquisition is also likely to harm innovation competition by eliminating innovations that ARM would have pursued but for a conflict with Nvidia’s interests. The merged firm would have less incentive to develop or enable otherwise beneficial new features or innovations if Nvidia determines they are likely to harm Nvidia, the complaint alleges.

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