The Competition and Markets Authority (CMA), the UK competition authority, published on January 10 a document (pdf) co-authored by Nvidia and Arm. The two companies defend the plan to acquire the second by the first, denying the risks that the transaction would pose on the semiconductor market.
Nvidia and Arm denounce fictionalized image of British company
This 28-page plea is part of the CMA’s Phase 2 investigation. After a first phase with unfavorable conclusions for the takeover of Arm by Nvidia, the British Minister for Digital and Culture, Nadine Dorries, had requested the initiation of this new stage of the procedure on the takeover in November.
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Nvidia was pleased to have thus had the opportunity to defend itself against any accusation of harming competition. The American company did not hesitate, in the hope of one day concluding the transaction estimated at 40 billion dollars when it was announced in September 2020.
When British regulators fear that Nvidia will block access to certain Arm chip licenses from its competitors, the company points to an economic inconsistency. She explains that ” trying to exclude licensees from Arm would immediately reduce Arm’s license revenues, which would immediately damage Nvidia’s investment. No economically rational, publicly traded entity would adopt such a self-defeating strategy. “.
The other major suspicion from a competitive perspective is that Nvidia is limiting the development of Arm’s chip design licenses to that of interest to it. The American company denounces a fictionalized image of the company based in Cambridge.
Arm would have stable profits and increasing costs, which would threaten its profitability by 2030. The investments made by Nvidia could make Arm’s business sustainable. She brushes aside the idea of an IPO as a solution, ” SoftBank [actuel propriétaire d’Arm] considered and rejected an IPO in 2019 and again in early 2020 because the markets would not give him the necessary return on his investment “.
Hurry up…
Notably, the document submitted by Arm and Nvidia to the CMA does not mention the second part of the investigation requested by Nadine Dorries: national security. In times of scarcity, the semiconductor industry takes center stage. The British power wants to show that it is acting to maintain its sovereignty in the field after the case of the takeover of the chipmaker Newport Wafer Fab.
Nvidia and Arm, faced with investigations by the Federal Trade Commission in the United States, the European Commission and the suspicion of the Chinese authorities, seem to want to respond as widely as possible.
The two companies had agreed until March 2022 to complete the transaction. A delay that appears untenable in view of the accumulation of proceedings across the world. Nvidia does not budge, but the case is still badly done. The CMA investigation launched in November is expected to last 24 weeks in all.