The UK chip designer, Arm, was set to be purchased by Nvidia for $40 billion, but regulatory authorities in the UK, US, Europe, and China stopped the deal. However, Nvidia and Arms combat the blockage with a 28-page document to counter concerns.
Nvidia and Arm planned to resolve the transaction by eighteen months in September 2020. However, the plan has experienced several barriers. The regulation authorities express concern for competition reduction if the deal goes through. Gartner analyst Alan Priestly and other investors predict a high chance for the agreement to be completely blocked.
Nvidia and Arm counter the blockage
Nvidia and Arm have taken measures to object to the blockage by submitting a 28-page document to the UK’s Competition and Markets Authority. The write-up, which was published on Monday, covers why the deal should go through. The document further emphasizes the critics’ neglect of Arm’s existing financial state and the dramatization of the firm’s existing market power. The paper also blames the regulators for “romanticizing” Arm’s history.
Why the merger is being blocked
The primary concern of regulators is that the merger will reduce competition since Nvidia is a customer of Arm and designs chips based on Arms designs. Therefore, the acquisition can limit access to Arm designs for “neutral” semiconductors. It could also lead to higher prices and create limitations in the semiconductor market. The regulators also believe that the merger can compromise industry advancement due to a lack of options.
However, Nivida states that the merger will create more opportunities for progression, and Arm will also be presented with numerous investment opportunities.
Who is blocking the merger
The CMA plans to conduct a 24-week investigation to address the concerns, especially those about national security issues. That said, the document submitted by Nvidia and Arms fails to cover security entirely.
The Federal Trade Commission also blocked the deal last December by filing a lawsuit based on antitrust. The European Commission, the executive component of the EU, also carried out a comprehensive investigation to study the merger last October.
The authorities believe that the acquisition of Arm by Nvidia could result in limited access to Arm’s IP, which could cause significant disruptions in several markets that depend on the use of semiconductors.
Also read: Why the acquisition of ARM by Nvidia should be prohibited