Arm says blocking Nvidia acquisition discourages competition

• The blocking of the US$40 billion Nvidia acquisition of Arm will likely lessen innovation and investment in the UK, argued critics
• Investment heavyweight Softbank was the initial proposer of Nvidia-Arm acquisition deal

Chipmakers Nvidia and Arm have hit back against detractors and critics of the US$40 billion Nvidia-Arm deal, with both companies stating that blocking the deal will actually discourage competition, the opposite intent of the critics and detractors.

The duo argued that critics were actually insulting competitors Intel and AMD by saying that they could not compete with Arm. “No industry observer can seriously contend that Intel, AMD, and Arm’s other competitors are so incapable that they cannot even compete with Arm. Intel and AMD are the industry leaders, not also-rans,” argued Nvidia and Arm.

It was further pointed out that blocking the Nvidia-Arm deal would not promote competition, and could reduce British investment. “It would likely result in less investment in the UK, fewer resources for Arm, less innovation, and less competition worldwide,” proclaimed the duo.

The concerns raised against the Nvidia-Arm deal

This follows the recent decision by the UK that the deal raises “serious competition concerns”, in addition to the deal already facing possible probes on national security grounds.

Following its own investigation, Britain’s Competition and Markets Authority (CMA) highlighted concerns that included possible price rises to semiconductors, already facing a global shortage because of the pandemic.

“We’re concerned that Nvidia controlling Arm could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets,” CMA Chief Executive Andrea Coscelli said in a statement.

This was then followed by the US Federal Trade Commission (FTC) filing a lawsuit in administrative court to block the acquisition deal as well, on the basis that the deal would give one of the largest chip companies control over computing technology and designs that competitors rely on to develop their own chips.

“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, the head of the agency’s bureau of competition, in a press release announcing its move.

Misplaced blame?

However, contrary to common perception, chipmaker giant Nvidia was not the party that came up with the acquisition proposal. A document penned by Nvidia and Arm regarding the deal revealed that JapaneseSoftbank, the current owner of Arm, was the one that approached Nvidia with the proposed acquisition.

Softbank was going to exit Arm as it was nearing the end of its investment period, and proposed the acquisition to Nvidia instead due to the opportunities it would present to both parties.

“When SoftBank approached Nvidia with the possibility to buy Arm, the parties realized that Nvidia would be uniquely suited to help Arm create new intellectual properties and develop a world-class ecosystem that could stand as an alternative to x86, giving customers more choice and growing markets worldwide.”

“A viable alternative ecosystem would spur growth and demand for Nvidia’s platforms. It would encourage the x86 giants to innovate and expand their offerings as well, benefitting Nvidia,” said the tandem in the joint document.

The other option for Softbank’s exit was to set up an initial public offering (IPO) for Arm, which is the option deal opponents are favoring. However, Softbank had considered and rejected an IPO in 2019, and again in early 2020, due to the IPOs not being able to give Softbank the necessary return on its investment.

“We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast and innovate,” said Arm’s CEO, Simon Segars, adding that Arm faces significant challenges to growth as a standalone business.