The Federal Trade Commission (FTC) announced it has sued to block US chip supplier Nvidia Corp.’s acquisition of chip design provider Arm Ltd, saying the deal could “stifle competing next-generation technologies“.
“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 FTC bureau of competition director Holly Vedova in a statement.
“This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals. The FTC’s lawsuit should send a strong signal that we will act aggressively to protect our critical infrastructure markets from illegal vertical mergers that have far-reaching and damaging effects on future innovations.”
The US joins a number of other countries in opposing the merger.
The UK government ordered an investigation into the takeover last month after the Competition and Markets Authority (CMA) found the deal raised serious competition concerns.
Meanwhile, the European Commission, the executive arm of the EU, launched its own in-depth investigation into the deal in October.
Arm, which was acquired by Japan’s Softbank for US$32bn in 2016, employs 6,500 staff, including 3,000 in the UK. It has more than 500 clients, including Apple, Samsung and Qualcomm.
The takeover deal has nearly doubled in value from US$40bn to around US$80bn since it was announced in September 2020 on the back of a surge in Nvidia shares.
The merger was set to be completed by March 2022, but in August Nvidia CEO Jensen Huang said it would probably be delayed.
But many analysts believe the deal is now in peril.
“I believe it’s highly unlikely it will go through,” Gartner semiconductor analyst Alan Priestley told CNBC, pointing to the number of regulatory probes around the world.
"Nobody thinks the deal is going to close," said Stacy Rasgon, an analyst with Bernstein, told Reuters. "The data center 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 and Priestley said SoftBank may try to list Arm if the Nvidia deal falls through.
“They’ll probably try and IPO it,” he told CNBC, but questioned how well Arm would fare on its own.
“The issue Arm has, and this is the issue SoftBank faced, is how it drives its revenue,” Priestley said. “IP licensing is great but it’s really hard to squeeze it.”
Nvidia will owe a US$1.25bn breakup fee if the deal does not close, Reuters reported.