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FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger

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rjohnson11
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2021/12/02 13:26:22 (permalink)
https://www.techpowerup.com/289558/ftc-sues-to-block-usd-40-billion-semiconductor-nvidia-and-arm-chip-merger
 
The Federal Trade Commission today sued to block U.S. chip supplier Nvidia Corp.'s $40 billion acquisition of U.K. chip design provider Arm Ltd. Semiconductor chips power the computers and technologies that are essential to our modern economy and society. The proposed vertical 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. The FTC's complaint alleges that 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.

"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 FTC Bureau of Competition Director Holly Vedova. "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."
 
Arm, which is owned by Tokyo-based Softbank Group Corp., does not supply or market finished computer chips or devices. It creates and licenses microprocessor designs and architectures, referred to as Arm Processor Technology in the complaint, to other technology companies, including Nvidia. These companies, in turn, rely on Arm Processor Technology to make computer chips that power a wide range of modern computing devices, from smartphones to tablets to driver-assistance systems to computers in large datacenters. Arm also provides important related support and services. Arm licenses its Processor Technology using an industry-described neutral, open licensing approach and is often dubbed the "Switzerland" of the semiconductor industry, according to the complaint.

California-based Nvidia is one of the world's largest and most valuable computing companies, according to the complaint. Nvidia develops and markets computer chips and devices and is best known as the dominant supplier of standalone graphics processing units, or GPUs, for personal computers and datacenters, which are used widely for artificial intelligence processing and graphics processing. Nvidia also develops and markets products for advanced networking, datacenter central processing units, and computer-assisted driving. In these areas, both Nvidia and important competitors to Nvidia rely on Arm's technology to develop their own competing products.

Because Arm's technology is a critical input that enables competition between Nvidia and its competitors in several markets, the complaint alleges that 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 complaint alleges.

According to the complaint, the acquisition will harm competition in three worldwide markets in which Nvidia competes using Arm-based products:
  • High-Level Advanced Driver Assistance Systems for passenger cars. These systems offer computer-assisted driving functions, such as automated lane changing, lane keeping, highway entrance and exit, and collision prevention;
  • DPU SmartNICs, which are advanced networking products used to increase the security and efficiency of datacenter servers; and
  • Arm-Based CPUs for Cloud Computing Service Providers. These new and emerging products leverage Arm's technology to meet the performance, power efficiency, and customizability needs of modern datacenters that provide cloud computing services. "Cloud computing" refers to the increasingly popular computing business model in which large datacenter operators provide computing services remotely and/or directly offer computing resources for rent, as well as provide other support services to customers who can then run applications, host websites, or perform other computing tasks on the remote servers—i.e., "the cloud."
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.

Today, Arm's licensees - including Nvidia's rivals - routinely share competitively sensitive information with Arm. Licensees rely on Arm for support in developing, designing, testing, debugging, troubleshooting, maintaining, and improving their products, according to the complaint. Arm licensees share their competitively sensitive information with Arm because Arm is a neutral partner, not a rival chipmaker. The acquisition is likely to result in a critical loss of trust in Arm and its ecosystem, the complaint alleges.

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.

The complaint names Nvidia Corp., Arm Ltd., and Arm owner Softbank Group Corp. The Commission vote to issue the administrative complaint was 4-0. The administrative trial is scheduled to begin on August 9, 2022.

Throughout the investigation, Commission staff has cooperated closely with staff of the competition agencies in the European Union, United Kingdom, Japan, and South Korea.

NOTE: The Commission issues a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. For the latest news and resources, follow the FTC on social media, subscribe to press releases and read our blog.
 
NVIDIA needs to back out of this merger in my opinion. The UK is probably going to block it as well. 

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    Grey_Beard
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/02 15:14:45 (permalink)
    Does not seem to be much support for this Hail Mary merger. The US, UK and EU are all against it. The resistance seems valid, but I wonder if this is a reaction to the general mess that the technology supply chain is currently in, which would make the combined company even more powerful. Guess we will see if Team Green wants to spend some of their cash reserves to fight for this.



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    Flint 1760
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/02 15:31:35 (permalink)
    This deal was all but dead a while ago.  As a side note, if/when the merger fails, it will cost NVIDIA about $1.25B which was the downpayment and it will not be refunded (Source: Telegraph.co.uk).  Add in all the other costs including legal to this and it was expensive.
     
    The shareholders are not going to be happy.
     
    post edited by Flint 1760 - 2021/12/02 15:36:17


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    Xavier Zepherious
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/02 22:53:14 (permalink)
     the FTC arguementis false
     
    Nvidia caveat is to license all arm technologies equally and fairly as before
    be no different if it was only a partner or partial owner
     
    the only difference will be they get all the earnings from licensing - rather than just stock value
     
    what that will get them is more revenue - in which they could undercut competitors or -they could offer better value with combine synergies of the to 
    ie like AMD infinity fabric on AMD part - nvidia could do the same with its mellonix system -on a chip
     
    so yes the can offer all arm licenses as before just that NVidia could have synergies for awhile till other companies develop similar tech to go with their arm product
    or Nvidia will be in a position to undercut on pricing - maybe - depends on what other companies can garner with fab companies
     
    samsung should have no problem because they have their own fab
    Nvidia doesn't - this will level playing field in that respect against samsung
     
     
    like we never complained when intel had 85% of market
    so now their is more competition
    (and i mean that since we have google and china making their own cpus - let alone anyone else that makes arm)
    and Nvidia wants to get in the cpu game and now you are balking?
     
    phone makers will still get the arm chips designs and so will everyone else - Nvidia promised to share all ARM designs with everyone
    but they don't have to give up what Nvidia designs- so yeah they may have an advantage for a short few years - till everyone else develops their own fabric and cross technologies
    just keep them separate things(arm managed under and umbrella that nvidia can't mess with)
     
     
    add in Intel and AMD and google/amazon (who has bigger pockets than anyone else right now)
     
     
    what not enough competition
     
    heck a lot more than there was a decade ago
     
    post edited by Xavier Zepherious - 2021/12/02 23:03:28


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    rjohnson11
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/03 00:10:26 (permalink)
    It remains to be seen if NVIDIA can satisfy the demands of the UK, China, and the USA for this merger. 

    AMD Ryzen 9 5950X,  Corsair Mp600 Pro M.2, 128GB DDR4  Crosshair VIII Hero, RX 6900 XT Associate Code: H5U80QBH6BH0AXF. I am NOT an employee of EVGA

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    Xavier Zepherious
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/05 15:57:03 (permalink)
    NVIDIA is the perfect complement to Arm.
    Combining our expertise with NVIDIA’s AI leadership will give Arm’s UK-based engineers access to technology and resources that Arm alone would not have. NVIDIA’s considerable investment in both the UK and Arm will expand our roadmap of research and development and allow us to invest in and grow our UK-based talent. Our engineers will be able to adapt and enhance NVIDIA’s AI technologies for our customers, create new UK-origin intellectual property and grow Arm’s influence in the technology sector.
     
    There’s been a lot of ill-informed speculation out there about what the future of Arm with NVIDIA will look like.  Some believe that an initial public offering (IPO) would have been a better path. Others are concerned that Arm will leave the UK, while some have fears that Arm will become anti-competitive. These assumptions couldn’t be further from the truth and I’d like to address them head-on.
     
    The combination of Arm and NVIDIA is a better outcome than an IPO. The level of investment that will be needed to lead in AI will be unprecedented. We’ve been down this road before when we predicted a major market shift in 2016. We knew that we needed to invest heavily in our products, talent, and technology to take advantage of the opportunities ahead. The initial investments came when SoftBank acquired Arm; it enabled us to build new technologies that expanded our reach into data centers, the automotive and networking industries, all while retaining our leadership in mobile.
     
    Now is the time for us to take our scale to the next level to address the technology challenges ahead. We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast and innovate. Combining with NVIDIA will give us the scale, resources and agility needed to maximize the opportunities ahead. This deal is the best opportunity for Arm and our customers and will enable the UK to be a meaningful industry player in the age of AI.
     
    By Simon Segars, Chief Executive Officer, Arm
     
    https://www.arm.com/blogs/blueprint/arm-nvidia
    post edited by Xavier Zepherious - 2021/12/05 15:59:33


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    Qjimbo
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/05 16:55:18 (permalink)
    Wow, completely missed this.

    Really goes to show just how globalized the world is today when two companies separated by distance and culture could merge like that. It’s like if Honda was merging with GM or something.

    Interesting times for sure.
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    Flint 1760
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/05 17:02:05 (permalink)
    You mean like Fiat owning Chrysler, Jeep, Dodge, and RAM.  As far as Honda and GM are concerned: "GM forms alliance with Honda to develop future products in North America" (Source: freep.com)
    post edited by Flint 1760 - 2021/12/05 17:04:38


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    Qjimbo
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    Re: FTC Sues to Block $40 Billion Semiconductor NVIDIA and Arm Chip Merger 2021/12/05 17:03:05 (permalink)
    Flint 1760
    You mean like Fiat owning Chrysler, Jeep, Dodge, and RAM.

    Oh good point! Haha. Well there you go. Just goes to show the trend towards this kind of thing.
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