(Adds context about Softbank, Arm financials and share prices)
SAN FRANCISCO/WASHINGTON, Dec 2 (Reuters) - The U.S. Federal
Trade Commission on Thursday sued to block U.S. chip company
Nvidia Corp's more than $80 billion planned acquisition
of British chip technology provider Arm, adding to already
significant global regulatory challenges of the deal.
The FTC said the proposed deal would give one of the largest
chip companies control over computing technology and designs
that competitors rely on to develop their own competing chips.
The deal has been widely expected to fall apart after facing
opposition in the chip industry. British regulators said last
month they would launch an in-depth probe of the deal, and it is
also under scrutiny in the European Union.
Arm licenses its chip architecture and blueprints to major
chipmakers Apple Inc, Qualcomm Inc and Samsung
Electronics Co Ltd, underpinning the global
smartphone ecosystem. Arm was sold to Japan's SoftBank
Nvidia said it would "work to demonstrate that this
transaction will benefit the industry and promote competition."
Arm declined to comment.
The stock-heavy deal has more than doubled in value since it
was announced in September 2020 as Nvidia shares have risen on
the performance of its data center business. Nvidia will owe
only a $1.25 billion breakup fee if the deal does not close, and
its shares closed up 2.2% at $321.26 on Thursday.
"Nobody thinks the deal is going to close," said Stacy
Rasgon, an analyst with Bernstein. "The data center story has
been really playing out. The software narrative has become a
bigger piece of the story. I would love to see this deal, but I
don't think they need it."
Before Nvidia's offer, Softbank had planned to file for an
initial public offering for Arm. While Arm's revenue is growing
briskly, rising 56.3% to $1.46 billion in the six months ended
Sept. 30, it is unclear whether Arm, in an IPO, would fetch
anything close to the $80 billion in value offered by Nvidia.
That would be a new blow for the Japanese conglomerate whose
Vision Fund assets sank by $10 billion last month, driven by
plummeting valuations for investments in Chinese e-commerce firm
Alibaba and ride-hailing service Didi Global Inc
The FTC, which is made up of two Republicans and two
Democrats, voted 4-0 to approve the challenge to the planned
'HIGHER PRICES AND LESS CHOICE'
The FTC alleged "the proposed merger would give Nvidia the
ability and incentive to use its control of this technology to
undermine its competitors, reducing competition and ultimately
resulting in reduced product quality, reduced innovation, higher
prices, and less choice, harming the millions of Americans who
benefit from Arm-based products."
The FTC added the combined firm "would have the means and
incentive to stifle innovative next-generation technologies,
including those used to run datacenters and driver-assistance
systems in cars."
Some semiconductor firms such as MediaTek Inc and
Broadcom Inc have voiced support for the deal. But
other firms such as Qualcomm have opposed it over concerns that
Nvidia would have a first look at key technologies that they
depend on and could then have better insights into their future
Qualcomm did not immediately respond to a request for
Nvidia's chief executive, Jensen Huang, made a biting
comment at an industry dinner last month, saying that Qualcomm
Chief Executive Cristiano Amon, who recently took the helm of an
industry trade group, had proven to be a master advocate in the
battle over Arm. Qualcomm had its own extensive battles with
global regulators, including the FTC, which Qualcomm prevailed
over after the regulator brought an antitrust lawsuit against
"He's the perfect person to advocate for our industry,"
Huang said from a stage as Amon sat in the audience. "I was
trying to figure out, how is it possible that Cristiano knew
every single regulator on the planet, and by the time I got
there to tell them about my story on Arm, he was already there
advocating against it?" Huang said, to stunned laughter from the
The FTC said it has cooperated closely with staff of the
competition agencies in the European Union, United Kingdom,
Japan, and South Korea.
(Reporting by Stephen Nellis in San Francisco, David Shepardson
and Diane Bartz in Washington and Kanishka Singh in Bengaluru
Editing by Rosalba O'Brien, Peter Henderson and Matthew Lewis)