Rival Nvidia’s $ 75 Billion Buyout of Chip Designer Arm Threatened

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The $ 75 billion buyout of Cambridge-based chip designer Arm by rival Nvidia is threatened after US regulators followed the UK and Europe to block “the biggest meltdown of semiconductor chips in the story “.

The Federal Trade Commission has filed a lawsuit to stop the buyout of Arm, which has grown in value from $ 40 billion to $ 75 billion since the offer was made last September due to an outbreak market share in the chip sector, as seemingly almost insurmountable opposition now mounts after regulators’ action in Europe and the UK.

“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” said Holly Vedova, director of the competition bureau at the FTC. “This proposed deal would distort Arm’s incentives in the chip markets and allow the combined company to unfairly undermine Nvidia’s competitors.” “

The FTC, now the biggest threat to derail the California-based takeover of Nvidia, said the lawsuit should send “a strong signal that we will act aggressively to protect our critical infrastructure markets against illegal vertical mergers ”.

The United States is the latest market to worry about the merger as countries around the world increasingly focus on the ramifications of takeovers that threaten national security and infrastructure companies in the industry technological.

The growing global shortage of chips – the “brains” of every electronic device in the world, from smartphones and iPads to cars and smart TVs – has increased takeover activity and sharpened the focus of regulators.

“The proposed vertical deal would give one of the largest chip companies control over the computer technology and designs that its competitors rely on to develop their own competing chips,” the FTC said.

Arm, which employs 6,500 people, including 3,000 in the UK, has been described as the “Switzerland” of the semiconductor industry, with its designs used by vendors including competitors to Nvidia.

Arm, whose $ 32 billion acquisition by Japanese group SoftBank in 2016 did not raise any regulatory concerns, has more than 500 customers who use its designs and compete globally, including Apple, Samsung and Qualcomm.

Nvidia, which has pledged not to scale down Arm’s operations in the UK and to keep its licensing model open, said the deal “would help accelerate Arm and spur competition and innovation, including in the United Kingdom ”.

The FTC, whose committee voted unanimously to take action and said it has cooperated with competition agencies in the European Union, the United Kingdom, Japan and South Korea, did not agree. “The proposed merger would give Nvidia the ability and the incentive to use its control of this technology to undermine its competitors,” the FTC said. ” [It would] reduce competition and ultimately result in reduced product quality, reduced innovation, higher prices and less choice.

Last month, the UK government ordered a full investigation into the Nvidia takeover. Nadine Dorries, digital and cultural secretary, said Arm has a “unique place in the global technology supply chain.”

The government’s intervention followed the first conclusions of the Competition and Markets Authority in July that the agreement raised serious competition concerns, and the regulator’s assessment that no “behavioral remedy” offered by NVIDIA would not be enough to resolve them.

Despite growing obstacles to the deal, Masayoshi Son, managing director of seller SoftBank, said last month that he expected the takeover to finally be cleared.

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