WASHINGTON – The Federal Trade Commission sued Thursday to block $40 billion acquisition of Nvidia A fellow chip company, Arm, has halted the largest semiconductor industry deal in history, as federal regulators push to rein in corporate consolidation.
The FTC said the deal between Nvidia, which manufactures the chips, and Arm, which licenses the chip technology, would reduce competition and harm consumers. The proposed deal would give Nvidia control over the computing technology and design that rival companies rely on to develop competing chips.
“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” said Holly Vedova, director of the FTC’s Bureau of Competition. “This proposed deal would distort Arm’s incentives in the chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”
Federal antitrust regulators have promised more scrutiny of mergers and crackdown on monopolies to reinvigorate competition in the economy. The action against the deal is the first major merger decision by the Federal Trade Commission, led by Leena Khan, who is critical of large corporate mergers and monopolies in technology. Ms Khan is one of the top antitrust officials Elected by President Biden to rein in the power of Silicon Valley giants,
the administration also had promised to break open gas, telecom and pharmaceutical markets To reduce consumer prices for gas and home internet and prescriptions at the gas pump. last month, Justice Department sued To prevent Penguin Random House, the largest publisher in the United States, from acquiring its rival Simon & Schuster.
Nvidia said in a statement that it would fight the FTC lawsuit. “We will continue to work to demonstrate that this transaction will benefit the industry and encourage competition.”
The FTC suit, if successful, would not have an immediate financial impact on Nvidia or Arm. Nvidia shares rose slightly in aftermarket trading.
But a successful suite would be a blow to Nvidia’s ambitions to play a more central role in shaping the direction of the computer industry — particularly in the area of artificial intelligence.
Arm, a British company that is a Japanese conglomerate softbank Purchased in 2016, license designs for microprocessors and other technology that other companies use in their semiconductors. Its technology has been wildly successful, providing compute functions in essentially all smartphones and many other devices. Arm recently estimated that its technology is used in about 25 billion chips per year.
Nvidia, based in California, is a major provider of chips used to render graphics in video games, the technology also powering artificial-intelligence applications used by cloud companies and self-driving cars in recent years. adapted to provide.
The company’s chief executive, Jensen Huang, is pushing the company to become a comprehensive, “full-stack” provider of computing technology. In April, for example, Nvidia said it was building an Arm-based microprocessor for servers to be used in data centers.
Announcing the deal in September 2020 to buy Arm, Mr. Huang said the combination would make it a leading company to advance AI technology. He also promised Arm to act independently without any changes to its business model and to treat all chip customers fairly.
Mr Huang said at the time that artificial intelligence would set off a new wave of computing and that “our combination will build a company for the age of AI”.
But the deal was controversial from the start, as some of Arm’s big customers, such as Qualcomm, were concerned about increased competition from Nvidia and the possibility of accessing the rival’s confidential information. Mr. Huang took a dig at Qualcomm’s new CEO, Cristiano Amon, at an annual dinner hosted by the Semiconductor Industry Association in Silicon Valley last month, asking, “How is it possible that Cristiano knows every regulator on the planet?”
The deal had already attracted close scrutiny from regulators in Europe, particularly in the United Kingdom, where Arm’s headquarters in Cambridge is a major employer. Britain’s Competition and Markets Authority launched a thorough investigation into the transaction in November, citing both competition and national security concerns.
The FTC said the merger would give Nvidia access to sensitive information about its rivals, which license the technology and design from Arm.
“Licensees rely on Arm to assist with the development, design, testing, debugging, troubleshooting, maintenance and improvement of their products,” the FTC said in a statement. “Arm licensees competitively share sensitive information with Arm because Arm is a neutral partner, not a rival chip maker. This acquisition is likely to cause a serious loss of trust in Arm and its ecosystem.”
There was a unanimous vote among the commissioners of the FTC to block the merger. The full complaint filed by the agency is not expected to be released for a few days. An administrative trial for the trial is scheduled for May 10.