FTC Sues to Block Sale of Arm to Nvidia
- Paul Thurrott
- Dec 02, 2021
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36
The U.S. Federal Trade Commission (FTC) today sued to block Nvidia’s $40 billion acquisition of chip designer Arm, citing competitive concerns.
“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,” FTC Bureau of Competition Director Holly Vedova said. “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.”
Nvidia announced its intention to purchase Arm from Softbank for about $40 billion, over one year ago, in September 2020. But the deal fell under immediate criticism from the major industry players that rely on Arm’s chipset designs, and the UK government announced in April that it would “intervene” for national security reasons. In August, Nvidia admitted that the acquisition, which it had hoped to finalize by the end of 2021, would likely be delayed.
Now, it may not happen at all.
“We will continue to work to demonstrate that this transaction will benefit the industry and promote competition,” Nvidia said, adding that it would contest the FTC lawsuit.
Conversation 36 comments
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christianwilson
Premium MemberLog in to Reply<p>I understand the concern, but if not Nvidia or one of their competitors, who would be a good parent company for ARM? </p>
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lvthunder
Premium MemberLog in to Reply<p>No one. That’s the point. The people against this want ARM to be a stand-alone company.</p>
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hrlngrv
Premium MemberLog in to Reply<p>If ARM processors are used by MANY independent hardware makers, does it make sense for ANY of those hardware makers to own ARM?</p>
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bkkcanuck
Log in to Reply<p>They could have done an IPO, there is no need to be acquired by anyone else.</p>
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wright_is
Premium MemberLog in to Reply<p>Softbank took a bath on some of its (I believe mainly Chinese) investments last year, they were looking to quickly sell off ARM, which is one of their strongest investments, to make up the shortfall.</p>
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bkkcanuck
Log in to Reply<p>Actually, he came into a good chunk of money based on his Chinese investment (Alibaba) and then apparently thought he was an investing genius with spectacular failures which I could only shake my head at… WeWork is the one I am still shaking my head at… it was basically a glorified real estate play at valuations like it was a .com business, then there is Uber which is a constant money drain… Not saying they are not bad business ideas, but buying high and selling low is not the best strategy.</p>
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bkkcanuck
Log in to Reply<p>Post decision to sell ARM to cover those losses, he has had some other lead eggs that are in the Chinese market (hit by crackdown on tech companies)… So his losing streak is continuing. </p>
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wright_is
Premium MemberLog in to Reply<p>It is a highly profitable, independent entity, why does it need to be owned by any chip maker?</p><p><br></p><p>Softbank are only trying to divest their investment because they took a bath elsewhere and ARM is one of their most valuable investments.</p>
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christianwilson
Premium MemberLog in to Reply<p>You are right, of course. It isn’t necessary for ARM to be owned by anyone. I was looking at it from the perspective that SoftBank didn’t spin it off and instead was looking for someone to buy.</p><p><br></p><p>I agree the best option is for ARM to become independent and maybe that will happen now. </p>
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bkkcanuck
Log in to Reply<p>That is only because Softbank was trying to sell off profitable operations to raise money quickly — not sure they needed money quickly or whether they wanted it to cover the losses for financial reporting reasons (cut the size of the reported losses overall). The IPO process is not a quick process, it could take years of a company becoming ready before the IPO… the funny thing is with all these roadblocks – it might have actually been quicker. IPO for a solid company (like ARM) at the right time could actually raise more money than a straight sale. </p>
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lvthunder
Premium MemberLog in to Reply<p>Elections have consequences. This administration is so anti-business</p>
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jchampeau
Premium MemberLog in to Reply<p>The five FTC commissioners each serve seven-year terms and neither party can have more than three. Four of the five current commissioners’ terms began in 2018, and for those keeping score at home, this means they were nominated by Trump.</p>
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hrlngrv
Premium MemberLog in to Reply<p>Could a POTUS appoint 3 commissioners from his own party and 2 who are members neither of his own party nor the main opposition party? That is, could there be 3 Republicans and 2 Libertarians? Or 3 Democrats and 2 Greens?</p>
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jchampeau
Premium MemberLog in to Reply<p>I’m not sure. Why don’t you ask him? I presume the answer will no since one of the people Trump nominated is a democrat, and because if it were possible, it would go against the spirit of the rule which is intended to ensure the FTC remains independent and can do its job without political influence and interference.</p>
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evictedkoala
Log in to Reply<p>You mean pro consumer and common sense. Some of you are just itching for a 100% corporate fascist state vs the 90% one we have now, all in the name of an immature definition of what freedom and liberty in a working society actually are.</p>
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lvthunder
Premium MemberLog in to Reply<p>No, I mean anti-business. You can’t be pro-consumer if you are damaging where everyone works. So how would Nvidia acquiring ARM harm consumers? It’s not like Nvidia is a huge company.</p>
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wright_is
Premium MemberLog in to Reply<p>nVidia is a huge company. They are one of the biggest graphic cards makers, they make ARM chips for everything from vehicles and IoT up to servers. They have nearly 20,000 employees, that seems to make them a large company, they are most definitely not an SME.</p><p><br></p><p>The harm to consumers is the fear that nVidia will syphon of the best bits of ARM for themselves, leaving everybody else at a disadvantage. This is why the merger has either been rejected or is under close scrutiny pending a decision in many countries. The UK and EU have already put the blockers on, for instance, the US is actually late to the game.</p>
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bkkcanuck
Log in to Reply<p>nVidia is not a small company, and it is not a company that is compatible with the business model that ARM works under (which is a licensee of technology or IP for other companies to make chips). nVidia is a closed proprietary company which directly competes with many of the companies who are licensees of ARM technology. The chip market itself is not rife with competition, it has very much consolidated over the last 30 years. ARM is the licensee of technology behind around 6+ billion chips that are made very year for devices ranging from CPUs in the largest supercomputers to IoT devices. Further consolidation which affects such a wide spectrum of other companies and further consolidation that threatens consumers — has to be looked at very carefully. It is why the UK/EU and the US anti-trust regulators are taking a very close look at it (it was understood to be a high likelihood when the deal was announced). It might not be pro-nVidia or pro acquiring company, but antitrust regulators are not there to protect acquiring companies – it is to ensure open and vibrant competition is maintained in the marketplace and that it is not harmed. It would not have been a good idea for many companies, including Apple who use to own a large portion of ARM (and nVidia) to be allowed to buy out ARM as there is a significant risk to market competition. You would be combining nVidia who is the largest (by far) making of GPUs which are used in datacenters and for AI purposes (and proprietary) — with the largest open licensee of CPUs. That is not a risk that the antitrust regulators can afford to take IMHO.</p>
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bkkcanuck
Log in to Reply<p>BTW, nVidia is 4 times as large as Intel by Market Cap ($800+ billion vs $200+ billion).</p>
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JoePaulson
Log in to Reply<p>You make no sense…at all. You are letting your politics decide what you consider facts rather than rational thought.</p>
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wright_is
Premium MemberLog in to Reply<p>Why anti-business? The EU, the UK and many other monopolies & mergers boards around the world are against this as well.</p><p><br></p><p>ARM is a hugely profitable business that doesn’t need to be owned by another entity and the industry would be better off with them being independent. </p>
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JoePaulson
Log in to Reply<p>Preventing further concentrations of resources is not anti-business. FFS The government is not supposed to just rubber stamp mergers. </p>
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blue77star
Log in to Reply<p>Only in corrupted Federal Government. Government overreach goes beyond joke.</p>
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wright_is
Premium MemberLog in to Reply<p>Why? </p><p><br></p><p>Most of the rest of the world has already put a veto on the plans anyway or are closely investigating the planned merger. The FCC is just reiterating what many other countries have already said.</p><p><br></p><p>It is potentially bad for business, bad for competition and bad for consumers. The UK also want to keep ARM in the UK / away from US influence, because it is a key asset in the UK defence industry and don’t want it ending up being blocked from use by UK defence contractors, for example.</p>
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wright_is
Premium MemberLog in to Reply<p>That being said, they probably should have made that decision at the time it sold to Softbank…</p>
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JoePaulson
Log in to Reply<p>LOL…you think it’s corrupt to block a merger that will result in one customer of ARM to own the rights and IP for an entire industry?</p>
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RobertJasiek
Log in to Reply<p>So I understand that the UK could consider to intervene because ARM Ltd. is a UK company, and the USA or California might intervene because Nvidia is registered in California (USA).</p>
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hellcatm
Log in to Reply<p>So why block this but they let AT&T buy WB and DirecTV. They also let Spectrum buy Comcast. Is this worse than those? I don’t think so. I’m not saying they’re wrong, but they were wrong saying yes to many other mergers.</p>
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wright_is
Premium MemberLog in to Reply<p>Because this is of international importance. Many other jurisdictions have already put the kibosh on the deal, for national security (UK), consumer choice or competition reasons. The US was the only major power that hadn’t spoken out against the merger.</p><p><br></p><p>Whether the FCC gives it a pass or not, it is already blocked. This is more about face-saving on the part of the FCC.</p>
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JoePaulson
Log in to Reply<p>Because the FTC is no longer managed by pro-monopoly idiots?</p>
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Donte
Log in to Reply<p>Just idiots in general now.</p>
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Donte
Log in to Reply<p>This is way bigger than those mergers. This will have a global impact. NVIDIA plays aggressive hardball all the time with the video card industry to dominate it. ARM chips are used in so many devices globally that they could impact so many things in our lives if they use the same tactics as they do with the market manipulation they do with video cards. </p>
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dftf
Log in to Reply<p>Anyone else having an issue creating a new Forum Post on here? I’ve made-sure all cookies are allowed, and I’ve no-blockers running for this page, but I just keep getting "Shoot, we can’t find the page you’re looking for!"</p>
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bkkcanuck
Log in to Reply<p>Yes, always lots of problems.</p>
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roykirk
Log in to Reply<p>If the FTC ever sues to break up broadband monopolies, then I might take them seriously.</p>
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ivarh
Premium MemberLog in to Reply<p>I have no idea why FTC would stop this but I can understand why the English/EU want to stop it. </p><p>Its been worrying watching the US from the outside and their "unstable" politics. If ARM gets owned by a US company the rest of the world risks that a future administration does to a random another country what they did to China and blocks their use of ARM. If there is one thing Mr 45 have shown us (in the rest of the world) is that the US is capable of electing anyone regardless of stability to be their leader.</p>