FTC Sues to Halt Nvidia’s $40B Semiconductor Chip Company Purchase

According to a press release issued Thursday, the Federal Trade Commission (FTC) says the proposed deal between Nvidia and Arm would harm competition in the worldwide market and stifle next-generation technological innovation. The competition authority voted 4-0 to issue the administrative complaint seeking to block Nvidia Corp.’s acquisition of British chip designer Arm Ltd. after investigating the matter with competition agencies in the European Union, United Kingdom, Japan, and South Korea.

The FTC explains that California-based Nvidia is one of the world’s biggest and most valuable computing companies. It reportedly makes computer chips and devices and is the dominant supplier of standalone graphics processing units (GPUs), which are used for both artificial intelligence and graphics processing. It also manufactures data center central processing units, and “computer-assisted driving” systems, the FTC says.

Arm, owned by Japan-based Softbank Group Corp., creates and licenses microprocessor designs and architectures, referred to as Arm Processor Technology (APT). Companies rely on APT to make chips, the complaint says, as well as Arm itself to provide customer support and related services.

The FTC takes issue with the alleged fact that because both Nvidia and its rivals rely on Arm’s technology to develop products, the vertical merger would give Nvidia the ability and motive to use its control of APT to undermine its competitors. Specifically, the complaint identifies three global markets in which Nvidia competes using Arm-based products: high-level advanced driver assistance systems for passenger cars, DPU SmartNICs, sophisticated networking products used to enhance the security and efficiency of data center servers, and Arm-based CPUs for cloud computing service providers.

The FTC argues that the deal would reduce competition in these markets and ultimately result in diminished product quality, less innovation, higher prices, and fewer choices, harming American consumers. The agency also contends that Nvidia will receive competitively sensitive information from Arm’s licensees, some of whom are Nvidia’s competitors. In turn, this will undercut the incentive for Arm to pursue innovations perceived to conflict with Nvidia’s business interests, the FTC says.

The administrative trial is scheduled to begin in August 2022.