SAN FRANCISCO/WASHINGTON (Reuters) -The U.S. Federal Trade Commission on Thursday sued to block U.S. chip supplier Nvidia (NASDAQ:NVDA) Corp’s more than $80 billion planned acquisition of British chip design provider Arm.
The FTC said the proposed vertical deal would give one of the largest chip companies control over computing technology and designs that competitors rely on to develop their own competing chips.
Arm, Britain’s most important tech company, licenses its blueprints to major chipmakers such as Apple Inc (NASDAQ:AAPL), Qualcomm (NASDAQ:QCOM) Inc and Samsung Electronics (OTC:SSNLF) Co Ltd, underpinning the global smartphone ecosystem. Arm was sold to Japan’s SoftBank in 2016.
Nvidia said “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.”
Arm declined to comment.
The deal has been widely expected to fall apart after facing opposition in the chip industry. British regulators said last month they would launch an in-depth probe of the deal, and it is also under scrutiny in the European Union.
Nvidia shares, however, remained mostly unchanged by the news on Thursday as investors have focused on its growing data center business.
“Nobody thinks the deal is going to close,” said Stacy Rasgon, an analyst with Bernstein. “The data center story has been really playing out. The software narrative has become a bigger piece of the story. I would love to see this deal, but I don’t think they need it.”
The FTC, which is made up of two Republicans and two Democrats, voted 4-0 to approve the challenge to the planned merger.
‘HIGHER PRICES AND LESS CHOICE’
The FTC alleged “the proposed merger would give Nvidia the ability and incentive to use its control of this technology to undermine its competitors, reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices, and less choice, harming the millions of Americans who benefit from Arm-based products.”
The FTC added the combined firm “would have the means and incentive to stifle innovative next-generation technologies, including those used to run datacenters and driver-assistance systems in cars.”
Some semiconductor firms such as MediaTek Inc and Broadcom (NASDAQ:AVGO) Inc have voiced support for the deal. But other firms such as Qualcomm have opposed it over concerns that Nvidia would have a first look at key technologies that they depend on and could then have better insights into their future products.
At a chip industry dinner last month, Nvidia’s chief executive, Jensen Huang, made a biting joke about opposition to the deal from Qualcomm Chief Executive Cristiano Amon, who had just been named chair of an industry trade group tasked with advocating for the chip industry to global regulators.
“He’s the perfect person to advocate for our industry,” Huang said from a stage as Amon sat in the audience. “And let me tell you why. I connected some dots tonight. I was trying to figure out, how is it possible that Cristiano knew every single regulator on the planet, and by the time I got there to tell them about my story on Arm, he was already there advocating against it?” Huang said, to stunned laughter from the crowd.
The U.S. company agreed to buy ARM from Softbank (OTC:SFTBY) in September 2020, triggering a backlash from politicians, rivals and customers.
The FTC said it has cooperated closely with staff of the competition agencies in the European Union, United Kingdom, Japan, and South Korea.