Europe opens extended investigation into ARM-Nvidia deal

October 27, 2021 // By Nick Flaherty
Europe opens extended investigation into ARM-Nvidia deal
The European Commission has formally opened an in-depth investigation into the ARM-Nvidia deal and is due to report by March 2022

The European Commission (EC) is concerned that the merger or ARM and Nvidia would have the ability and incentive to restrict access by Nvidia’s's rivals to ARM's technology

This could lead to higher prices, less choice and reduced innovation in the semiconductor industry, which is why it has opened the detailed investigation into the deal that it is extending to look at the implications for R&D.

“Our analysis shows that the acquisition of ARM by Nvidia could lead to restricted or degraded access to ARM's IP, with distortive effects in many markets where semiconductors are used,” said Margrethe Vestager, Commission Executive Vice-President for competition policy.

“Our investigation aims to ensure that companies active in Europe continue having effective access to the technology that is necessary to produce state-of-the-art semiconductor products at competitive prices.”

“Semiconductors are everywhere in products and devices that we use everyday as well as in infrastructure such as datacentres. Whilst ARM and Nvidia do not directly compete, ARM's IP is an important input in products competing with those of Nvidia, for example in datacentres, automotive and in Internet of Things,” she said.

Following its preliminary investigation, the Commission considers that ARM has significant market power on the market for the licensing of CPU IP for processor products where the merged company  would have the ability to restrict or degrade access to ARM's technology by providers of processor products that Nvidia may compete with.

The preliminary investigation suggests that the merged entity would also have the economic incentive to engage in such foreclosure strategies which could reduce competition in the market for the supply of processor products across different areas, including datacentre CPUs, smart network interconnects as well as automotive advanced driver-assistance and infotainment systems.

The Commission also highlights risks in SoCs for high-performance IoT devices, gaming consoles and PCs.

The Commission will also further examine whether the transaction might stifle innovation because ARM licensees might be reluctant to continue sharing commercially sensitive information with the merged entity because they are competing with Nvidia and a potential refocussing of ARM's R&D spending on products that are most profitable for Nvidia downstream, to the detriment of players heavily relying on certain ARM IP in other areas. 

There is global interest in the deal, including in the UK and China, and the Commission says it has been closely cooperating with competition authorities around the world and will continue this during the in-depth investigation.

The Commission now has 90 working days, until 15 March 2022 to take a decision but it says the opening of an in-depth inquiry does not prejudge the final result of the investigation.

More information will be available on the Commission's competition website, in the Commission's public case register under the case number M.9987.

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