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, Qualcomm, and Samsung, underpinning the global smartphone
ecosystem. Arm was sold to Japan's SoftBank in 2016.
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 centre business. Nvidia will owe only a $1.25 billion breakup fee
if the deal does not close, and its shares closed up 2.2 percent at $321.26 on
Thursday.
"Nobody thinks the deal is going to close," said
Stacy Rasgon, an analyst with Bernstein. "The data centre 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 percent to $1.46 billion in the six months ended September 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.
The FTC, which is made up of two Republicans and two
Democrats, voted 4-0 to approve the challenge to the planned merger.
'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 datacentres and driver-assistance systems in cars."
Some semiconductor firms such as MediaTek and Broadcom 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 products.
Qualcomm did not immediately respond to a request for
comment.
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 it.
"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 crowd.
The FTC said it has cooperated closely with staff of the
competition agencies in the European Union, United Kingdom, Japan, and South
Korea.
© Reuters
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