Nvidia’s Plan to Become the King of Chip Design Hits the Rocks

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(Bloomberg)-Nvidia Corp in September 2020. Is Arm Ltd. When it announced plans to acquire, the deal was more than the largest acquisition ever in the chip industry-the company said it would enhance the technology found in everything from cars to smartphones.

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More than a year later, the bold plan is at stake. The Federal Trade Commission has called on Thursday to block $ 40 billion in purchases, calling it a threat to semiconductor innovation. Weapon customers are against this deal. And investors and analysts have canceled the idea that it has happened so far.

Nvidia has vowed to fight, but the outlook is bleak as regulatory oversight is escalating around the world.

“We’ve always said that the deal is unlikely to be approved,” said Matt Bryson, an analyst at Wedbush Securities. “We also believe that the investment community has almost the same opinion.”

Nvidia is prospering without trading and increasing investor indifference. Based in Santa Clara, California, the company’s share has increased 146% this year, boosted by pushes to server chips. Shareholders barely flinch after the FTC proceedings were announced on Thursday. Shares rose 2.2% near $ 321.26.

The FTC proceedings arose from concerns about Nvidia’s potential to dominate the semiconductor industry and beyond. Nvidia uses Arm to control chip designs used by the world’s largest technology companies, including smartphones, factory equipment, and car manufacturers.

“FTC is trying to prevent the merger of the largest semiconductor chips in history to prevent chip conglomerates from disrupting the innovation pipeline of next-generation technologies,” Holly Bedova, director of competition for the committee, said in a statement. I have. “

Arm, owned by SoftBank Group Corp., is known as Switzerland in the semiconductor market. We license the technology to hundreds of companies, but we are not competing with any of them. All major chip makers are Arm customers, and many of these companies, including Qualcomm Inc., Intel Corp., and Advanced Micro Devices Inc., sell chips that directly compete with Nvidia’s products.

Ownership of Arm is a highly controversial issue, as it has the advantage of giving it to the chipmakers who acquire it. And Nvidia is already heavyweight in the industry. Under co-founder and CEO Jensen Huang, the 28-year-old company has become one of the most valuable listed semiconductor manufacturers in the world.

Nvidia said in a statement that the acquisition of Arm would benefit the industry and promote competition.

“Nvidia will invest in Arm’s R & D to accelerate its roadmap, drive competition, increase opportunities for all Arm licensees, and expand its offerings in ways that expand the Arm ecosystem,” the company said. ..

Arm’s bid was a record tip deal when it was first announced last year. And the increased value of Nvidia shares, a key component of the selling price, made the transaction even more valuable.

However, opponents are also growing steadily. Qualcomm is one of the leading companies raising competitive concerns about purchasing and is also facing a national security review in the UK, where Arm is based. According to Bloomberg Intelligence, the deal may face challenges from other investigative authorities, including the European Commission and Chinese regulators.

Arm technology is Apple Inc. Both and Samsung Electronics Co., and their chips are dominant in smartphones used by Qualcomm, which is the basis of most premier models in the industry. Arm is also advancing into computing such as Apple’s M-series processors and data centers with Amazon.com Inc.’s in-house design using server chip technology.

Named for its video game graphics processor, Nvidia is now selling chips for everything from artificial intelligence to cryptocurrency mining. Adding Arm to an already formidable lineup has been difficult for the industry (or regulators) to swallow.

“This combo would have been too many,” said Chris Rolland, an analyst at the Susquehanna Investment Group.

From the moment the deal is announced, analysts have been worried about regulatory barriers in that way. Many have said that Nvidia should continue to do the same. In short, license Arm technology to beat your competitors and bring better products to market.

However, the tedious process could have had some benefits for Nvidia. By causing confusion to rivals and wasting resources and time on alternatives to Arm technology, the merger attempt could have helped the company, whether it was accomplished or not.

If Arm’s trading eventually becomes widespread, it will create a “synergy of revenue,” Bryson said. But he is not betting on the event.

“The potential failure of the proposed M & A should be largely burned into expectations,” he said.

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