Why NVIDIA’s Planned Acquisition of Arm Has Collapsed

In September 2020, NVIDIA announced its intention to acquire Arm in a groundbreaking $40 billion deal. When this news became public, several companies, including Google, Microsoft, and Apple, aired their concerns about the merger.

This was soon followed by several months of regulatory hurdles and investigations. Then, as NVIDIA’s March 2022 deadline loomed large on the horizon and government negotiations were still heading nowhere, they finally pulled the plug on the transaction.

All this institutional pressure led to the NVIDIA-Arm deal’s collapse. But why were competitors and governments concerned in the first place?

A Conflict of Interest

With the Arm purchase, NVIDIA aimed to take advantage of Arm’s ecosystem and combine it with their AI computing technology. NVIDIA envisioned expanding and using Arm’s facilities in the UK for AI research into healthcare, life sciences, robotics, self-driving cars, and more.

Since NVIDIA is also in the computing space, they would have used Arm’s processor design to create a CPU/GPU combo to rival Intel and AMD offerings. After all, if AMD has Ryzen and Radeon, and Intel has the i-Series and Arc, it would make sense for the number one discrete GPU maker to offer a processor.

However, Arm is also the sole designer and licensor of the ARM chip architecture. This chip design practically powers all smartphones globally and is making in-roads in the PC market, garnering an 8% market share in 2021. If the NVIDIA-Arm deal was pushed through, NVIDIA’s competitors feared that this would have led to anti-competitive conduct.

Related: What Is an ARM Processor?

NVIDIA repeatedly affirmed that it had no intention of interfering with Arm’s core business, ensuring it would keep its open-licensing model and maintain customer neutrality. Despite that, both Google and Microsoft raised concerns that the merger would limit rival access to the latter’s technology or even increase its license prices to give their homegrown products a competitive advantage.

Regulatory Challenges

The arguments made by these companies against the NVIDIA-Arm deal were of sufficient weight that both the UK’s Competition and Markets Authority (CMA) and the US’s Federal Trade Commission (FTC) moved to block the deal.

Aside from the cited potential antitrust threat that both the American and British governments are worried about, the UK government was also concerned about national security implications over the proposed deal. Digital Secretary Oliver Dowden was said to have “considered advice received from officials across the investment security community.”

Related: The End of an Era: Is Big Tech in Trouble?

CMA started its investigation in April 2021, after the UK Secretary of State issued a public interest intervention notice. The agency released its phase one report in November 2021, raising several issues. These include a substantial decrease in competition and stifling innovation, resulting in more expensive or lower-quality products. The UK government then ordered a phase 2 probe to investigate these issues much deeper.

In the US, FTC Bureau of Competition Director Holly Vedova issued a statement about the deal:

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.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.

Even the European Commission opened an in-depth investigation in October 2021, while there were rumors that China would also block the deal. Because of all these concerns, NVIDIA finally terminated the proposed acquisition last February 7, 2022.

Where Do We Go From Here?

Despite the deal falling through, SoftBank Group, the owner of Arm, still retains a handsome $1.25 billion fee. On the other hand, NVIDIA gets to keep its 20-year ARM license. However, the company will have to find alternative ways to develop its AI technologies.

Now that NVIDIA can’t purchase Arm, SoftBank’s next step is to take the latter public. They’re currently pursuing an IPO for the chip designer in the fiscal year 2022, beginning April 1.

While some might be disappointed that we’re losing a potential major competitor to Intel and AMD, this move might be for the best. After all, if NVIDIA reneged on its promises, it would cause damage to the global chip market.

This could potentially make the current global chip shortage seem like a drop in the bucket—that’s why many are inclined to stop it. But, as they say, prevention is better than cure.

Read Next

About The Author