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British competition watchdog sounds alarm about Arm’s takeover

The Competition and Markets Authority (CMA) has warned that Nvidia’s purchase of influential Cambridge-based chip designer Arm could stifle innovation.

Arm is one of the most successful and influential British companies. It designs the industry standard chip architecture found in all categories of computing devices, from supercomputers to microcontrollers, and is considered the world leader in processors for mobile devices.

In 2016, Arm was acquired by SoftBank under a $32 billion (£24 billion) deal. In September 2020, Nvidia announced it would buy a 90 percent stake in Arm for $40 billion (£31 billion), leaving SoftBank with the remaining 10 percent pending regulatory approval. The change of ownership is controversial due to Nvidia’s significant presence in the semiconductor industry, which could jeopardize Arm’s unique business model of open licensing and partner neutrality.

The CMA has warned that the deal could limit Nvidia’s rivals’ access to Arm’s nearly ubiquitous technology. It said the proposed acquisition raises serious competition concerns in a number of markets, including data centers, gaming and autonomous vehicles.

The regulator recommended an in-depth investigation into the proposed deal.

“We are concerned that Nvidia, which controls Arm, could cause real problems for Nvidia’s rivals by limiting their access to key technologies and ultimately stifling innovation in some important and growing markets,” said Andrea Coscelli, CEO of the CMA. “This can lead to consumers missing out on new products or causing prices to rise. The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day.”

“This includes the critical data processing and data center technology that powers digital businesses across the economy, and the future development of AI technologies that will be important to growth industries such as robotics and self-driving cars.”

Nvidia has said it will keep Arm in the UK and has offered a measure to regulate Arm’s ongoing behavior, but the CMA said it wouldn’t allay its concerns.

It has reported its concerns to the Ministry of Digital, Culture, Media and Sport, where a decision will be made on the next steps. A spokesperson for the department said: “We have received the Phase 1 report from the CMA and the Digital Secretary will make a decision in due course on whether or not to proceed with the next phase of the investigation.”

An Nvidia spokesperson said: “We look forward to the opportunity to discuss the initial views of the CMA and resolve any concerns raised by the government. We remain confident that this transaction will benefit Arm, its licensees, the competition and the UK.”

The government also separately considered the national security implications of the deal, and the CMA confirmed that it had also provided ministers with a summary of third-party statements on the matter.

Meanwhile, there is controversy over the proposed acquisition of the UK’s largest semiconductor factory, Newport Wafer Fab, and the acquisition of two of the country’s largest defense companies by foreign or foreign-backed owners. Semiconductors, along with conventional defense technologies, are considered a strategically important technology for national security.