Setback for Nvidia, as the European Commission confirms full-scale investigation into purchase of British chip designer ARM Holdings
The European Commission has officially opened its long-touted probe into Nvidia’s $54 billion purchase of the UK’s chip designer ARM Holdings.
The EC confirmed it has opened an in-depth investigation to assess the proposed acquisition of ARM by Nvidia under the EU merger regulations.
The official EC probe comes after the undisclosed concessions offered earlier this month by Nvidia failed to address the EU’s competition concerns.
However it should be noted that the UK’s Competition and Markets Authority (CMA) watchdog, and indeed the British government – are already leading reviews of the deal for the British company.
In January 2021 the CMA confirmed it would investigate Nvidia’s acquisition of ARM Holdings.
Three months later in April, the British government responded to the global pressure about the deal, and issued a ‘public interest intervention notice’ over ARM’s sale, citing national security implications.
And in August it was reported that after the CMA submitted its report to the British government about the matter on 30 July 2021, there are signs the deal may be blocked by the UK on national security grounds.
But now despite the UK leading the review for the purchase of a British company, the European Commission is now officially investigating after it said it concerned that the merged entity would have the ability and incentive to restrict access by Nvidia’s rivals to ARM’s technology.
The EC said that the proposed transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.
“Semiconductors are everywhere in products and devices that we use everyday as well as in infrastructure such as data centres,” said executive VP Margrethe Vestager, responsible for competition policy.
“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 data centres, automotive and in Internet of Things,” said Vestager.
“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 Vestager. “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.”
Specifically, the EC is concerned 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 fields of application.”
This includes data centre CPUs; smart network interconnects used in data centres; semiconductors used for automotive advanced driver-assistance systems (‘ADAS’); semiconductors used in infotainment applications; SoCs equipping high-performance IoT devices; SoCs used in gaming consoles; and finally SoCs used in general-purpose PCs.
The EC move is undoubtedly another set for Nvidia’s hopes to purchase ARM.
It has pledged to has promised to preserve the ARM business model and to keep the company headquartered in England, in an effort to alleviate competition concerns.
Besides the UK and EU investigations, the US Federal Trade Commission (FTC) and even China’s State Market Regulatory Administration are said to be investigating the proposed deal.