7 January 2021CopyrightMuireann Bolger

Nvidia’s takeover of Arm faces licensing probe by competition regulator

The UK Competition and Market Authority (CMA) will investigate US chipmaker Nvidia’s $40 billion deal to buy UK-based chip designer Arm’s IP business.

The competition regulator confirmed yesterday, January 6, that it would look at the acquisition’s possible effect on competition in the UK, and whether Arm would “have an incentive to withdraw, raise prices or reduce the quality of its IP licensing services to NVIDIA’s rivals”.

On September 13, Nvidia, the biggest US chip company by market capitalisation, negotiated with Japan’s SoftBank Group to buy Arm in an acquisition expected to take about 18 months from the date the deal was signed.

Arm develops and licenses IP and software tools for chip designs, and the deal has fuelled concerns about its position as a “neutral supplier” that provides IP to Apple, Qualcomm and others for chips that power smartphones worldwide.

In September, Nvidia CEO Jensen Huang argued the deal was “pro-competition” and marked “the first time in history the industry could see something that is genuinely alternative” to Intel Corp’s domination of the sector”.

In a bid to allay fears over the competition, Nvidia has committed to keeping Arm’s open-licensing model and the UK chipmaker’s much-vaunted “customer neutrality”, which SoftBank pledged to retain when it acquired the business in a $32 billion deal in 2016.

To that end, Arm has pledged to install “firewalls” to prevent access to confidential information from Arm’s customers, or early access to Arm’s products, Reuters has reported.

Andrea Coscelli, chief executive of the CMA, said: “The chip technology industry is worth billions and critical to many of the products that we use most in our everyday lives. We will work closely with other competition authorities around the world to carefully consider the impact of the deal and ensure that it doesn’t ultimately result in consumers facing more expensive or lower quality products.”

He added: “The CMA’s remit, by law, is to assess the potential impact of a merger on competition. It cannot consider other potential effects that a merger might have, for example on employment or industrial strategy.”

The UK government has also been scrutinising the deal, and may yet intervene on grounds such as public interest or national security.

The CMA said it was inviting views on the effect of the deal on competition ahead of the launch of its investigation until January 27.

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