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Monday, January 24, 2022

FTC sues to end blockbuster deal between Nvidia and Arm

WASHINGTON. The FTC sued Thursday to block Nvidia’s $ 40 billion acquisition of another chip company, Arm, halting the largest semiconductor deal in history as federal regulators try to rein in corporate consolidation.

The FTC said the deal between Nvidia, which makes the chips and Arm, which licenses the chip technology, will stifle competition and harm consumers. The proposed deal would give Nvidia control over the computing technology and designs that rival firms rely on to develop competing chips.

“The technology of tomorrow depends on maintaining today’s competitive and cutting-edge chip markets,” said Holly Vedova, director of the FTC’s Competition Bureau. “This proposed deal will distort Arm’s incentive in the chip markets and allow the combined firm to unfairly undermine Nvidia’s competitors.”

Federal antitrust regulators have pledged to monitor mergers more closely and curb monopolies to boost competition in the economy. The lawsuit against the deal is the first major merger decision by the FTC under the leadership of Lina Khan, criticizing large corporate mergers and technology monopolies. Ms. Khan is among the top antitrust officials elected by President Biden to rein in the giants of Silicon Valley.

The administration has also pledged to open up gas, telecommunications and pharmaceutical markets to lower consumer prices for gas stations, home internet and prescriptions. Last month, the Justice Department sued to prevent Penguin Random House, the largest publishing house in the United States, from acquiring rival Simon & Schuster.

In a statement, Nvidia said it would contest the FTC’s claim. “We will continue to work to demonstrate that this transaction will benefit the industry and promote competition.”

If successful, the FTC’s lawsuit will have no immediate financial impact on Nvidia or Arm. Nvidia shares are up slightly in the secondary market.

But a successful lawsuit would be a blow to Nvidia’s ambition to play a more central role in shaping the direction of the computer industry, especially in the field of artificial intelligence.

Arm, a British company that Japanese conglomerate SoftBank bought in 2016, licenses the development of microprocessors and other technologies that other companies use in their semiconductors. Its technology has proven to be extremely successful as it provides computing functionality in virtually all smartphones and many other devices. Arm recently estimated that its technology is used in about 25 billion chips a year.

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Nvidia, based in California, is the dominant supplier of chips used to render graphics in video games, a technology it has adapted in recent years to support artificial intelligence applications used by cloud companies and self-driving cars.

Jen-Hsun Huang, CEO of the company, pushed the company to become a broader provider of full-cycle computing. In April, for example, Nvidia said it was building an Arm-based microprocessor for servers used in data centers.

In announcing the Arm acquisition deal in September 2020, Huang said the merger would create a leading company to advance artificial intelligence technologies. He also pledged to manage Arm without any changes to its business model, acting independently and treating all chip customers fairly.

Mr. Huang said at the time that artificial intelligence would launch a new wave of computing and that “our combination will create a company fantastically suited to the age of artificial intelligence.”

But the deal sparked controversy from the start, as some of Arm’s big customers, such as Qualcomm, were worried about heightened competition from Nvidia and the possibility of a rival gaining access to their sensitive information. At an annual dinner hosted by the Semiconductor Industry Association last month in Silicon Valley, Mr. Huang unearthed Qualcomm’s new CEO Cristiano Amon and asked, “How is it possible that Cristiano knew every regulatory agency on the planet?”

The deal has already attracted close attention from regulators in Europe, especially in the UK, where Arm’s headquarters in Cambridge is a major employer. The UK Competition and Markets Authority began a thorough investigation of the deal in November, citing competition and national security concerns.

The FTC said the merger would give Nvidia access to confidential information about its competitors, which license technology and development from Arm.

“Licensees rely on Arm to support the development, design, testing, debugging, troubleshooting, support and improvement of their products,” the FTC said in a statement. “Arm licensees share confidential information with Arm because Arm is a neutral partner and not a competing chip manufacturer. The acquisition is likely to result in a critical loss of trust in Arm and its ecosystem. “

FTC commissioners voted unanimously to block the merger. It is expected that the full complaint filed by the agency will not be published within a few days. The administrative process for the claim is scheduled for May 10.

World Nation News Deskhttps://www.worldnationnews.com
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