The proposed agreement, would give one of the major chip firms control over computer technologies and designs that competitors use to produce their own competitive processors.
The US Federal Trade Commission filed a lawsuit on Thursday to halt Nvidia’s planned acquisition of British chip technology supplier Arm for more than $80 billion (approximately Rs. 5,99,760 crore), adding to the deal’s already enormous worldwide regulatory obstacles.
After meeting opposition from the semiconductor industry, the merger was largely expected to fall apart. Last month, British authorities said that they will open an in-depth investigation of the purchase, which is also being scrutinised by the European Union.
Nvidia Makes an Offer to the European Union
Arm licenses its chip architecture and blueprints to major chipmakers Apple, Qualcomm, and Samsung, underpinning the global smartphone ecosystem. Arm was sold to Japan’s SoftBank in 2016.
Nvidia said it would “work to demonstrate that this transaction will benefit the industry and promote competition.”
The stock-heavy deal has more than doubled in value since it was announced in September 2020 as Nvidia shares have risen on the performance of its data centre business. Nvidia will owe only a $1.25 billion (roughly Rs. 9,370 crore) breakup fee if the deal does not close, and its shares closed up 2.2 percent at $321.26 (roughly Rs. 24,090) on Thursday.
“Nobody thinks the deal is going to close,” said Stacy Rasgon, an analyst with Bernstein. “The data centre story has been really playing out. The software narrative has become a bigger piece of the story. I would love to see this deal, but I don’t think they need it.”
Before Nvidia’s offer, SoftBank had planned to file for an initial public offering for Arm. While Arm’s revenue is growing briskly, rising 56.3 percent to $1.46 billion (roughly Rs. 10,945 crore) in the six months ended September 30, it is unclear whether Arm, in an IPO, would fetch anything close to the $80 billion (roughly Rs. 5,99,760 crore) in value offered by Nvidia. That would be a new blow for the Japanese conglomerate whose Vision Fund assets sank by $10 billion (roughly Rs. 74,970 crore) last month, driven by plummeting valuations for investments in Chinese e-commerce firm Alibaba and ride-hailing service Didi Global.
The FTC, which is made up of two Republicans and two Democrats, voted 4-0 to approve the challenge to the planned merger. ‘Higher prices and less choice’
The FTC alleged “the proposed merger would give Nvidia the ability and incentive to use its control of this technology to undermine its competitors, reducing competition and ultimately resulting in reduced product quality, reduced innovation, higher prices, and less choice, harming the millions of Americans who benefit from Arm-based products.” The FTC added the combined firm “would have the means and incentive to stifle innovative next-generation technologies, including those used to run datacentres and driver-assistance systems in cars.”
Some semiconductor firms such as MediaTek and Broadcom have voiced support for the deal. But other firms such as Qualcomm have opposed it over concerns that Nvidia would have a first look at key technologies that they depend on and could then have better insights into their future products.
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- The US Federal Trade Commission has filed a lawsuit to prevent Nvidia from acquiring Arm
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