NVIDIA/ARM Deal Under Greater Scrutiny in the UK
The UK’s Competition & Market Authority has issued a report that suggests a Phase 2 investigation into the proposed merger is warranted on competitive grounds. The CMA stated, “We’re concerned that Nvidia (NVDA) controlling ARM (9984.JP) could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets.” The report summary goes a bit deeper in that it uses ARM’s estimation that 70% of the world’s population engages with ARM-based technology, which is a bit like saying 100% of the global population walks on silicon based products (sand).
That said, the report did note that it saw the possibility for SLCs (Substantial Lessening of Competition) should the merger proceed concerning CPUs and GPUs for data centers, network interface controllers, SoC’s for IoT, automotive, autonomous vehicle and driver assistance systems, and most important to the ‘real world’, the supply of SoC’s for gaming consoles. This covers quite a wide swath of silicon production and while the wording might be a bit melodramatic, the conclusion that the CMA came to was quite specific.
That said, the report did note that it saw the possibility for SLCs (Substantial Lessening of Competition) should the merger proceed concerning CPUs and GPUs for data centers, network interface controllers, SoC’s for IoT, automotive, autonomous vehicle and driver assistance systems, and most important to the ‘real world’, the supply of SoC’s for gaming consoles. This covers quite a wide swath of silicon production and while the wording might be a bit melodramatic, the conclusion that the CMA came to was quite specific.
- The CMA does not consider that the conduct required to address the competition concerns identified can be specified with sufficient clarity, to provide a lasting remedy that is capable of effective monitoring and enforcement.
- This risk is significant in this case, having regard to the complexity and evolving nature of the contracts and markets, the magnitude of the concerns identified, and the breadth and technically specialist nature of the offer. The CMA found that such a behavioral remedy would carry material specifications, circumvention and monitoring risks. Therefore the CMA does not believe any form of behavioral remedy would address the competition concerns identified.
- It also does not believe and partial divestment of ARM’s IP business(es) would be sufficiently clear-cut and comprehensive for phase 1.
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