Chinese tech firms see Nvidia’s Arm deal as a major threat

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Huawei and other Chinese technology companies want regulators to block the acquisition.

Bloomberg News reported that Huawei and several other Chinese tech firms have raised concerns to local regulators about chipmaker Nvidia’s deal to buy UK-based chip designer Arm.

Last month, Nvidia announced it will buy Arm from Japan’s SoftBank Group Corp for as much as $40 billion. This would mean that Apple and others across the industry would come under the control of a single player.

Related: Why the acquisition of ARM by Nvidia should be prohibited

Since then, a group of Chinese tech firms have been lobbying the State Administration for Market Regulation (SAMR) to reject the transaction. Alternatively, they are pressuring the authorities to let the deal proceed only conditions that would ensure their access to Arm technology. according to Bloomberg. Their report cited people familiar with the matter.

Why Arm is so critical

Arm does not make chips but has created an instruction set architecture – the most fundamental intellectual property that underpins computing chips – on which it bases designs for computing cores.

Arm licenses its chip designs and technology to customers like Qualcomm Inc, Apple and Samsung. Apple’s forthcoming Mac computers will use Arm-based chips.

Nvidia CEO Jensen Huang said the deal, which will boost his firm in data centre chips, was “pro competition”. He also asserted that Arm will not become subject to U.S. export controls under the deal.

Related: Arm says it will protect confidential info after Nvidia acquisition

Part of the U.S.-China trade war?

Arm’s semiconductor designs and architecture are central to most of the world’s electronics from smartphones to supercomputers. Despite Huang’s assurances, the Chinese tech firms fear that Arm could be co-opted into the U.S.-China struggle for supremacy in the tech sector.

Any review of the deal in Beijing is likely to be colored by what the Chinese perceive as growing U.S. attempts to contain its largest technology companies.

China imports about $300 billion worth of chips annually. That dependence on foreign chips may worry Chinese regulators enough to try and extract concessions from Nvidia.

For example, SAMR may demand that Nvidia keep the Arm business independent and separate.

The deal needs sign-offs from China, the U.K., the EU and the U.S. Nvidia and Arm have said they’re confident they’ll get a green light from all the localities, but it may take as long as 18 months to secure the necessary approvals.

Tip: Why the acquisition of ARM by Nvidia should be prohibited