Nvidia to face EU eyeballing over Arm takeover

In September 2020, Nvidia announced a deal to acquire Arm Holdings for $40bn, pending regulatory approval. Arm is among the UK’s most influential companies, responsible for designing the industry-standard chip architecture found in every category of computing device and used by 70 per cent of the world’s population. It was bought by SoftBank in 2016, from which Nvidia hopes to buy a 90 per cent stake.

Now, the European Commission is preparing to investigate the acquisition as a result of competition concerns. According to The Financial Times, Nvidia plans to formally notify the EU of its intention to purchase Arm in the first week of September.

Two sources told the newspaper that this will trigger an investigation into the sale, beginning with a 25 working-day preliminary review. As Nvidia is unlikely to offer concessions during this review, it is likely to be followed by a 90 working-day full-scale investigation led by the European Commission.

Reuters previously reported that Nvidia may not be able to meet a March 2022 deadline for concluding the deal, on account of European regulators being reluctant to consider the case until after the summer holidays.

News of the deal prompted concern that Arm’s independent and neutral business model, based on open licensing, could be compromised by the acquisition. Nvidia is the world’s biggest maker of graphics and AI chips.

Arm’s purchase by SoftBank was not so controversial, due to SoftBank not having a significant presence in the semiconductor industry, thus not presenting a threat to Arm’s business model. SoftBank also entered a legally binding pledge to maintain Arm’s UK headquarters for at least five years; there are concerns that Nvidia may evade a similar agreement.

Earlier this year, digital secretary Oliver Dowden made an intervention in the proposed takeover, citing national security concerns. He called for the competition regulator to prepare a “phase one” report on the implications of the takeover. The regulator, the Competition and Markets Authority, concluded last week that the acquisition may stifle innovation by restricting Nvidia’s rivals’ access to Arm’s technology. It said the acquisition raises competition concerns across markets including data centres, gaming and autonomous vehicles and recommended an in-depth investigation.

Nvidia says it has the support of Arm customers, including MediaTek, Marvell and Broadcom. A spokesperson said: “This transaction will be beneficial to Arm, its licensees, competition and the industry. We are working through the regulatory process and look forward to engaging with the European Commission to address any concerns they may have.”