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No End In Sight For NVIDIA-Arm Deal

No End In Sight For NVIDIA-Arm Deal

  • The shares of NVIDIA fell by 3.5% after the UK initiated a probe into the graphic chip maker’s proposed acquisition of Arm Holdings.

The UK government is taking a long hard look at the controversial NVIDIA-Arm deal citing national security concerns. The acquisition deal was in the crosshairs of the British and European competition watchdogs since its announcement in September last year.

After careful consideration of the proposed takeover, digital secretary Oliver Dowden, on Monday (April 19, 2021), issued a public interest intervention notice to assess the implications. 

Further, Dowden wrote to the competition and markets authority (CMA), asking them to start a phase I investigation to examine the nature of the transaction.

Accordingly, the competition watchdog will prepare a report stressing competition, jurisdiction and national security concerns. The report will include a summary of any representations it receives on potential national security issues arising from expert consultation, alongside examining the national security public interests. 

As per the digital secretary directions, the CMA has to submit the report by July 30, 2021.

Once the report is ready, the digital secretary will decide whether to clear the transaction based on public interest and competition. The government will also initiate a phase II investigation for further scrutiny in case of any competition bias.

The shares of NVIDIA fell by 3.5% after the UK government initiated a national security probe into the graphic chip maker’s proposed acquisition of Arm Holdings from Japan’s Softbank.

So, what’s the deal with NVIDIA-Arm?

Based in Cambridge, UK, Arm is a global chipmaker specialising in designing and licensing semiconductor components, tools and software. Its chip architectures are used across the technology spectrum, ranging from artificial intelligence (AI) to quantum computing to 5G. 

Besides NVIDIA, Arm’s technology solution is currently being used by companies such as Google, Qualcomm, Foxconn, Zoom, and Samsung Electronics. Most of its competitors in the chip segment are also against this acquisition. If the deal goes through, it could potentially make NVIDIA the next tech monopoly.

Arm’s presence in defence and national security-related technologies make the deal further problematic. Dowden said the country supports the tech industry and welcomes foreign investment. However, the national security implication on a transaction like this becomes crucial, he added. 

Recently, a lawsuit was filed by Arm China against three executives appointed by the board to replace CEO Allen Wu, which could further delay the takeover of Arm by NVIDIA. Also, there are speculations that China’s regulators could also get in the way of NVIDIA’s Arm acquisition. 

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Why NVIDIA wants Arm so badly 

With the acquisition stuck in limbo, the graphic chip designer NVIDIA, last week announced the launch of a new processor called Grace, along with other initiatives and partnerships.

For instance, the Grace central processing chip has been designed using Arm’s open-source architecture. This new CPU chip by NVIDIA is designed to accelerate high performing computing (HPC) and AI workloads at data centres. With this, NVIDIA will be competing with Intel, AMD, Samsung Electronics and the likes. 

Some industry insiders believe the launch of Grace was a little early as its NVIDIA-Arm deal could run into more resistance from competitors

Last month, Arm also launched its Armv9 or ninth generation architectural update after a decade. The timing of both NVIDIA launching Grace and Armv9 launch looks a bit suspicious, and tech experts believe this could be a stop-gap measure for something big in the making. 

Though graphic chip maker NVIDIA looks optimistic about the acquisition deal, the governments, regulators, competitors and technology partners worldwide are not convinced with the whole idea of NVIDIA owning Arm, and it is unlikely that this deal will go through. 

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