Nvidia’s EU Filing for Arm Deal Kicks Off Tough Scrutiny

(Bloomberg) -- Nvidia Corp. sought European Union approval for its plan to take over U.K.-based chip developer Arm Ltd., kick-starting a tough antitrust probe that could further thwart plans to close the deal by early next year.

The European Commission set an initial Oct. 13 deadline to rule on the transaction, according to a website that showed the companies filed with regulators on Wednesday.

With rivals and chip customers lining up to criticize the deal, the EU is likely to extend its review by at least another four months to examine potential competition concerns. Nvidia had originally set a March 2022 date to complete the deal valued at about $40 billion when it was announced a year ago. 

Qualcomm Inc. and Alphabet Inc.'s Google have voiced complaints that Nvidia's control of Arm's licenses for essential chip technology could threaten the Cambridge, England-based chip designer's role as a neutral partner often compared to the Switzerland of the semiconductor industry. Other customers, including Broadcom Inc., MediaTek Inc. and Marvell Technology Group Ltd., have been supportive of the transaction.

The U.K.'s competition watchdog has already signaled the need for a longer national probe. It wants to examine concerns that Nvidia could cut off rivals' access to Arm's ubiquitous and power-efficient designs used in technology ranging from data centers to smartphones. Britain is still weighing a separate investigation into potential risks to national security. The tie-up also needs approval from the U.S. and China.

Keeping Promises

Nvidia has countered that it will maintain open licensing and that the deal will help Arm, its licensees and the industry. It floated a potential pledge with the U.K.'s Competition and Markets Authority that regulators said were insufficient at this stage. Antitrust officials rarely approve so-called “behavioral commitments” without a more careful review due to the difficulty of checking how a company will keep its promises.

The chipmaker said Wednesday it is “working through the regulatory process” and looked “forward to engaging with the European Commission to address any concerns they may have.”

A longer EU probe can allow companies to negotiate more complicated concessions with authorities. Nvidia has suggested potential ways to use machine automation to compare code to show that the code it's licensing is the same as it is using for its own designs. 

Arm owns the most widely used set of standards and designs in the $400 billion chip industry. Its technology is at the heart of most of the world's smartphones and is finding an increasing role in computing, including in server machinery that runs corporate and government systems.

Arm has acted as a neutral party that sells chip blueprints and licenses its standards to a wide range of major technology companies, many of whom are fierce competitors. Ownership by Japan's SoftBank Group Corp., which acquired it in 2016 and which doesn't overlap with Arm's customers, has preserved that neutrality.

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