US FTC Blocks Nvidia's Acquisition of ARM Citing 'Harm to Fair Competition'

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Byunghee Park] The Federal Trade Commission (FTC), the U.S. equivalent of the Fair Trade Commission, has blocked the merger between U.S. and U.K. semiconductor companies Nvidia and ARM.

On the 2nd (local time), the Wall Street Journal (WSJ) reported that the FTC filed a lawsuit against Nvidia's acquisition of ARM, citing concerns that it would hinder fair competition.

In a complaint submitted to the administrative court, the FTC pointed out that Nvidia could gain illegal control over computing technology and design through the acquisition of ARM, forcing competitors to develop their own computing chips. The FTC also expressed concerns that Nvidia could exert overwhelming dominance over next-generation semiconductor technologies used in data centers and autonomous vehicles.

The FTC Commission unanimously decided to file the lawsuit with four votes in favor. The FTC Commission currently consists of Chair Lina Khan and two members each from the Democratic and Republican parties. This case is notable as the first antitrust competition case since Chair Khan took office in June.

ARM is a semiconductor design company headquartered in Cambridge, U.K. It holds absolute influence in the smartphone semiconductor market. Both Apple and Qualcomm, which dominate the smartphone's core component, the application processor (AP), are ARM's clients. Approximately 90% of smartphone semiconductors are manufactured using ARM's design technology.

For this reason, not only the U.S. but also competition authorities in the European Union (EU), the U.K., and China are conducting investigations into Nvidia's acquisition of ARM.

The U.K. Competition and Markets Authority (CMA) disclosed the results of its first-phase investigation into Nvidia's acquisition of ARM in July, stating there are "serious concerns from a competition perspective." The U.K. is conducting a second-phase investigation to determine whether the acquisition violates antitrust laws and poses a national security threat.

The European Union (EU) also launched an in-depth investigation into Nvidia's acquisition of ARM in October. At that time, the EU Commission expressed concerns that Nvidia's acquisition could limit access to ARM's design technology, leading to higher product prices and reduced technological innovation. The EU plans to complete the in-depth investigation by March 15 next year.

ARM was acquired by SoftBank in 2016, with SoftBank investing $32 billion at the time. Nvidia announced in September last year that it would acquire ARM for about $40 billion. Concerns about semiconductor market monopolization were raised at the time of the acquisition announcement.

Qualcomm, Samsung, Amazon, Huawei, and others have opposed Nvidia's acquisition of ARM, arguing that it could lead to a monopoly in semiconductor technology. Elon Musk, CEO of U.S. electric vehicle company Tesla Motors, is also reportedly opposed to Nvidia's acquisition of ARM due to concerns about hindering competition.

Nvidia had already stated last month that the FTC expressed concerns about the acquisition of ARM. At that time, Nvidia's CFO Colette Kress said, "We are continuing discussions with the FTC to address their concerns."

After the FTC's decision to file the lawsuit on this day, Nvidia released a statement saying, "We will continue to explain that the acquisition of ARM will benefit the semiconductor industry and promote competition."