not that simple! UK competition regulator warns of NVIDIA and ARM merger

In September last year, the US chip manufacturing giant Nvidia announced that it would acquire Arm from SoftBank. This $40 billion transaction caused a lot of controversy.

At that time, Huang Renxun, the founder and CEO of Nvidia, told reporters that the two companies are "completely complementary". He said:

"Nvidia does not design a CPU, we do not have a CPU instruction set, and Nvidia does not license IP to semiconductor companies. Therefore, from this point of view, we are not a competitor. We would like to add more IP tools, and they are different from Arm. The thing is, Nvidia has not set foot in the mobile phone market."

"Our purpose is to combine the engineering and technology, and R&D capabilities of the two companies, so that we can accelerate the technological development of Arm's huge ecosystem. One area that we are very interested in is accelerating the development of server CPUs."

Rene Haas, the president of Arm's IP Products Group, had previously assured that there would be a "firewall" between the two companies, adding that they would not contact Nvidia in advance. But he later admitted that Arm will have to share certain information with Nvidia, such as whether its important customers will turn to Arm's open source competitor-RISC-V.

Now, the British competition regulator said that it has found that Nvidia's proposed acquisition of the British Arm intellectual property business has competition problems. Prior to this, out of national security considerations, the British government launched a preliminary investigation.

When submitting a report to the Department of Culture, Media and Sports (DCMS), the Competition and Markets Authority (CMA) outlined its combined business, which will have the ability and incentive to impair the intellectual property rights of Nvidia’s competitor Arm by restricting access (IP).

At present, Arm's IP is used to produce semiconductor chips and related products, competing with Nvidia's products. These companies include Intel, Qualcomm, AMD and Xilinx.

CMA pointed out that if the proposed merger continues, it will result in the foreclosure of the supply of CPUs, interconnect products, GPUs and SOCs in multiple global markets, including data center, Internet of Things, automotive and game console applications.

In addition, in the report submitted by the CMA to the DCMS, it was stated that although Nvidia provided a set of “behavioral remedies” to address CMA’s concerns, the competition regulator found that recommendations would only lead to “considerable regulations, circumvention, and Surveillance and law enforcement risks”, and will not alleviate any of the CMA’s concerns.

CMA boss Andrea Coscelli said:

"Our concern is that Nvidia’s control of Arm may cause real problems for Nvidia’s competitors, such as restricting their access to key technologies, and ultimately stifling innovations in many important and growing markets. This may cause consumers to miss out on new innovations. Product, or product price increase"

The investigation report mentioned:

"The chip technology industry is worth billions of dollars and is vital to the products that businesses and consumers rely on every day. This includes key data processing and data center technologies that support the entire economic digital business, as well as the future development of artificial intelligence technology. Growth industries such as robotics and self-driving cars are critical."

In addition, the report also stated that the CMA failed to adequately investigate this area​.