In the name of fair competition, UK regulator invites comments from interested parties on Nvidia / Arm deal...
The UK’s Competition and Markets Authority (CMA), a non-ministerial regulatory body that investigates mergers and acquisitions, has launched an investigation into the proposed $40 billion acquisition of Arm by Nvidia (see “It’s Official: Nvidia buys Arm”).
As part of phase 1 of its inquiry, it is inviting written comments from interested parties about any competition issues that should be considered. This is part of its investigation into whether the transaction, if carried into effect, will result in substantial lessening of competition within any market or markets in the United Kingdom. The CMA will look at the deal’s possible effect on competition in the UK. It is likely to consider 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.
The CMA’s remit, by law, is to assess the potential impact of a merger on competition. It cannot consider other potential effects that a merger might have, for example on employment or industrial strategy. Also, any national security concerns would be a matter for the UK government, which can issue a public interest intervention notice, if appropriate.
Hence the CMA said that the inquiry it is launching this week is an early opportunity for interested third parties to comment on the impact that the takeover could have on competition in the UK, in advance of its formal investigation starting later this year. The invitation to comment is open until 27th January 2021, with details of where to send written comments here.
Our take is that there are enough powerful voices in the UK electronics industry as well as their supporters in government to make a big noise about protecting the UK’s technology industry from foreign ownership. As I reported last September, there was strong lobbying by two of the people who were instrumental in founding Arm, Hermann Hauser and Tudor Brown. They were concerned such a deal would mean the UK losing its crown jewel of the technology industry, and that it would be moved to the US.
When the deal was announced last year, Hauser said this would spell disaster for Cambridge, the UK, and Europe. He said, “It’s the last European technology company with global relevance and it’s being sold to the Americans.” If this deal did happen, he said it would risk jeopardizing Arm’s position as the “Switzerland of the semiconductor industry” where it allows hundreds of companies such as Apple, Samsung and Qualcomm to develop their own chips using its architecture. He added that if the company’s British character and open business model could not be protected, it would be better for the Prime Minister Boris Johnson to back a flotation on the London Stock Exchange.
Even Nigel Toon, CEO of Graphcore, who just raised $222 million ahead of a possible IPO next year, weighed in with his thoughts. He told the Financial Times newspaper in London that Nvidia’s planned $40 billion acquisition of Arm was “bad for competition, bad for the market overall, and bad for Britain.” He commented in the newspaper, “I think it smacks of anti-competitiveness. It’s market power coming into the hands of a big player that is going to reduce competition generally for the market.” He added, “If you were a chip company, would you want to go and share your road map for the next four years ahead with Arm, knowing they are part of Nvidia, and you’re effectively sharing your roadmap with Nvidia?”
Of course, Toon would have concerns about this given that Graphcore is directly competing with Nvidia, but he raises a point that others in the industry may also conceivably ask.
However, Jensen Huang of Nvidia ands Simon Segars of Arm would no doubt have been expecting this kind of debate playing out, and I am sure they are ready to play the long game to see it through. As I said previously, Jensen Huang is so confident despite the tough campaign ahead to convince multiple stakeholders, that he isn’t even contemplating a plan B.