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Nvidia may be walking away from its acquisition of Arm Ltd., the British chip designer, according to a report from Bloomberg.
The blockbuster deal faced global scrutiny, and Nvidia apparently feels that it hasn’t made sufficient progress in convincing regulators that the acquisition won’t harm competition or national security. “Nvidia has told partners that it doesn’t expect the transaction to close, according to one person who asked not to be identified because the discussions are private,” Bloomberg reported.
In a further sign that the deal is likely to be abandoned, SoftBank is also working to take Arm public, according to the report.
Nvidia isn’t publicly confirming the report, though. “We continue to hold the views expressed in detail in our latest regulatory filings—that this transaction provides an opportunity to accelerate Arm and boost competition and innovation,” an Nvidia spokesperson told Ars.
Battle over “Switzerland”
When Nvidia first announced its intention to purchase Arm in September 2020, the deal was valued at $40 billion. Since then, the chip shortage and rising popularity of ARM designs has driven the cost as high as $75 billion. Nvidia initially expected the deal to close in March 2022. If the deal falls through, Arm and Softbank will receive a $2 billion breakup fee.
For Nvidia, the acquisition had obvious upsides. ARM designs are used in everything from smartphones and servers to TVs and antilock braking systems. ARM chips use little power given their performance, which has given the company a broad footprint across a variety of industries. Those qualities were appealing to Nvidia, which has transformed itself from GPU manufacturer to chip designer and, in the process, has become one of the world’s largest semiconductor companies.
But competitors, including Qualcomm, Intel, and Google, were concerned that an Arm takeover—let alone one mounted by one of the sector’s largest firms—would limit their access to ARM designs. Nvidia has insisted that it will offer ARM licenses to anyone who is interested and willing to pay, but it has faced an uphill battle convincing competitors and regulators that those promises will be kept.
Many regulators have either announced investigations into the acquisition or come out against it. Last October, the European Union said it was looking into the deal, and in November, after an earlier probe found “serious competition concerns,” the British government said it was investigating the takeover on antitrust and national security grounds.
Finally, in December, the Federal Trade Commission announced that it was suing “to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” Holly Vedova, director of the FTC’s competition bureau, said in a statement at the time. The agency said the lawsuit aims to maintain Arm’s status as the “Switzerland” of the semiconductor industry, a neutral player that offers its designs to anyone.
Chinese concerns
Chinese regulators, worried about a key technology falling into the hands of a US company, are also questioning the deal. China has grown increasingly concerned that it lacks control over key technologies, particularly those related to semiconductors. The country spends more money importing semiconductors than importing oil, and ARM chips are as ubiquitous in China as they are elsewhere.
The Chinese Communist Party is undoubtedly frustrated by recent US attempts to limit the country’s competitiveness in the semiconductor market. In 2019, the Trump administration pressured the Dutch government to prevent a Chinese company from buying extreme ultraviolet lithography (EUV) machines made by Netherlands-based ASML. The machines are all but required to make chips under 7 nm. A year later, US officials imposed sanctions on Huawei, preventing the Chinese tech company from buying leading-edge chips made by TSMC.
Because of this history, Chinese officials almost certainly would have nixed the Nvidia-Arm transaction. Though, given the scrutiny the deal has faced elsewhere, it’s unlikely it would have gotten that far.