Regulators in US, UK, EU All Alarmed By Chip Maker Nvidia's $40B Deal to Buy Chip Designer

Regulators in the U.S., U.K., and the European Union are all alarmed by chipmaker Nvidia Corporation's $40 billion deal to buy chip designer Arm Ltd. from the Japanese technology company Softbank.

On Thursday, the Federal Trade Commission filed a lawsuit to block the deal, saying it make the Nvidia, based in Santa Clara, California, so powerful that it could hinder opportunities for new technology from elsewhere.

U.K. and E.U. regulators have also begun investigations on the deal due to concerns about competition, The Associated Press reported.

The deal has some concerned that Arm, based in the U.K., would stop licensing chip designs to tech companies, including competitors of Nvidia.

"The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies," FTC Bureau of Competition Director Holly Vedova said in a news release. "This proposed deal would distort Arm's incentives in chip markets and allow the combined firm to unfairly undermine Nvidia's rivals."

The FTC claimed that the deal would give Nvidia control over the technology that other companies need to manufacture their chips. Competitors in markets where Nvidia designs with Arm-based technology could be hurt, the FTC says.

Nvidia said that by buying Arm, it could "create the world's premier computing company for the age of AI."

The company also said it would "continue to work to demonstrate that this transaction will benefit the industry and promote competition." It said it is "committed to preserving Arm's open licensing model and ensuring that its IP is available to all interested licensees, current and future."

The company said it will "vigorously contest" the FTC's lawsuit.

For more reporting from the Associated Press, see below.

Nvidia Corp., Arm Ltd., FTC Lawsuit
People gather in the Nvidia booth at the Mobile World Congress mobile phone trade show Thursday, Feb. 27, 2014 in Barcelona, Spain. The Federal Trade Commission on Thursday, Dec. 2, 2021 sued to block graphics chip maker Nvidia’s $40 billion purchase of chip designer Arm, saying the deal would create a powerful company that could hurt the growth of new technologies. Manu Fernandez/AP Photo, File

Many of the world's smartphones run on Arm's chip designs and it is a vital supplier for companies like Apple and Samsung. It's also an innovator in chip technology that can power artificial intelligence for connected devices like medical sensors. Nvidia's chips are essential to computers and data centers and the company says it has a wide range of competitors, from chip makers like AMD, Intel and Qualcomm, to computer networking provider Cisco and tech giants Google and Amazon.

An Arm spokesperson referred questions to Nvidia. A Softbank spokesperson did not immediately reply to a request for comment.

The FTC said its four commissioners voted unanimously to file the complaint and a trial is scheduled to begin in August 2022.

President Joe Biden has called for federal regulators to give closer scrutiny to mergers and aimed at anticompetitive conduct in U.S. industry. He installed Big Tech critic Lina Khan as head of the FTC.

Nvidia Corp., Arm Ltd., FTC Lawsuit
Nvidia Corp. said the company is “committed to preserving Arm’s open licensing model and ensuring that its IP is available to all interested licensees, current and future.” It will "vigorously contest" the Federal Trade Commission's lawsuit to block their deal with Softbank to buy Arm Ltd. In this photo, a pedestrian walks past a SoftBank telecommunications store on a street in Tokyo on September 14, 2020. Kazuhiro Nogi/AFP via Getty Images