Competition and Markets Authority kicks off Nvidia/Arm investigation

The Competition and Markets Authority (CMA) has started the process to begin a formal investigation of Nvidia’s proposed £31bn merger with UK chipmaker Arm.

Arm’s business model is based on developing  and licensing intellectual property (IP) and software tools for chip designs, which are used to build embedded processors that power many modern smart devices. The Arm architecture is used by businesses and consumers across the UK for desktop computers and mobile devices, game consoles and vehicle computer systems.

Following the announcement of the proposed acquisition, Arm CEO Simon Segars said: “We will be able to accelerate innovation – to unleash the computing technology potential, to help organisations build and release ideas.”

Describing the deal, Nvidia CEO Jensen Huang said: “We would like to create the computing company for the age of AI [artificial intelligence].”

The opportunity for Nvidia is in being able to widen its library of software tools and AI technology architectures across the Arm ecosystem, which has the potential to simplify building and configuring machine learning hardware.

At the time the merger was announced, industry experts warned that such a deal could give Nvidia an unfair advantage. In particular, Nvidia, which has established a rival product set to Arm, may promote its own technology and make it far harder for companies to license Arm processor technology.

In December, Segars told CNBC that the two companies were prepared for scrutiny from regulators. He added that even though the proposed merger was with a US firm, this did not stop Arm from licensing its technology to other countries, such as China, where the US administration has imposed a number of export restrictions.

The CMA said it will be looking at the effect on competition in the UK if Nvidia’s acquisition of Arm goes ahead. The areas the regulator said it would look at include whether, following the takeover, Arm has an incentive to withdraw, raise prices or reduce the quality of its IP licensing services to Nvidia’s rivals.

Andrea Coscelli, chief executive of the CMA, said: “The chip technology industry is worth billions and is critical to many of the products that we use most in our everyday lives. We will work closely with other competition authorities around the world to carefully consider the impact of the deal and ensure that it doesn’t ultimately result in consumers facing more expensive or lower-quality products.”

In a letter inviting interested parties to submit comments, the CMA said it would be considering whether the merger between Nvidia and Arm could result in a substantial lessening of competition within any market or markets in the UK for goods or services. 

The CMA said there would be further opportunities to submit views once it begins its formal Phase 1 investigation.