Nvidia deal for Arm raises ‘serious competition concerns’, says UK watchdog

The UK competition watchdog has recommended an in-depth investigation into Nvidia’s planned $54bn takeover of British chip designer Arm, saying there are “serious competition concerns” about the deal.

The Competition and Markets Authority (CMA) on Friday published the findings of a report to the government in which it said the deal could “stifle innovation across a number of markets”.

Nvidia, the US chip maker, struck a deal with SoftBank, the Japanese investment conglomerate, to buy Arm last September for $40bn in shares and cash. The deal is now worth $54.3bn after a rise in Nvidia’s share price.

But the deal faces regulatory hurdles across the world, and Nvidia has recently admitted it will not complete the deal within its original 18-month timeframe. In a recent interview with the FT, Nvidia’s chief executive Jensen Huang said he remained “confident” that it would close by the end of 2022.

The UK has already referred the deal for a national security review and the EU is likely to open an in-depth investigation into the deal in days or weeks, said people with knowledge of the matter. Nvidia has only recently begun the process of seeking clearance in China, where Arm remains locked in a dispute with the head of its Arm China joint venture.

The CMA said it had received “a substantial number of detailed and reasoned submissions from customers and competitors” complaining about the proposed deal.

It concluded that since Arm’s designs are very widely licensed by other chipmakers, the deal could give Nvidia the ability to harm its rivals by restricting their access to Arm’s technology — something Nvidia has denied it would do.

Nvidia offered a “set of behavioural remedies” to appease the regulator, but the CMA said it “did not believe any form of behavioural remedy would address the competition concerns” it had identified.

CMA chief executive Andrea Coscelli said on Friday: “We’re concerned that Nvidia controlling Arm could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets. This could end up with consumers missing out on new products, or prices going up.”

The CMA said innovation could suffer in a wide range of areas, including data centres, gaming, the “internet of things” and autonomous vehicles.

Oliver Dowden, the culture secretary, must now decide whether to open an in-depth probe based on both national security and competition concerns, or hand back control to the competition watchdog to take it forward as a “phase 2” merger investigation.

Nvidia said in a statement: “We look forward to the opportunity to address the CMA’s initial views and resolve any concerns the government may have. We remain confident that this transaction will be beneficial to Arm, its licensees, competition, and the UK.”

Huang previously said he had no intention of “throttling” or “denying” Arm’s technology to any customer, and pledged to maintain Arm’s open licensing model. In a letter to the FT, Huang said Nvidia would “continue to support all of Arm’s customers, making Arm technology available to the whole marketplace”.

Additional reporting by Javier Espinoza in Brussels