from Wired (via Ars Technica)
The Federal Trade Commission has sued to block Nvidia’s acquisition of Arm, the semiconductor design firm, saying that the blockbuster deal would unfairly stifle competition.
“The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies,” Holly Vedova, director of the FTC’s competition bureau, said in a statement. “Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”
Reacting to this article, the statement by the FTC of their explanation on why they are suing Nvidia. The statement said, “The FTC is suing to block the largest semiconductor chip merger in history to prevent a chip conglomerate from stifling the innovation pipeline for next-generation technologies. Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets. This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals” (Wired). They tried iterating the magnitude of this deal between Nvidia and Arms away from monetary value and consequences. Yes, this would hurt the competing companies in receiving money and incentives. However, this would also hurt the development of the world and the quality of the internet.
Nvidia acquired Arm for 40 billion dollars at the time in 2020 but soared to 75 billion dollars today. The rise in value must be considered in the FTC’s decision. The FTC said that this deal would stifle the innovation pipeline for years to come, and this is in the technology business. In class we talked about how technology and the internet were the way of the future for business and law. This deal would stop the current rise of the technology business in innovation, specifically in the PC world. ARM chips were just about to take over for Intel and AMD. Chips like ARM have been innovating the PC world, with Apple M1 chips made x86 designs. Those designs could also innovate architecture.
This directly relates to my experience standing up for the International Shoe case. We talked about how the surrounding world’s condition can play a factor in the case. The ‘independent contractors’ were getting paid 500 thousand dollars a year in today’s world during the Great Depression. That’s what sealed International Shoe’s coffin. We also talked about the importance of a case after it’s been decided. If International Shoe had won the case and didn’t have to pay unemployment, every business would change their layout and plan accordingly.
This article talks about how the Federal Trade Commissions sued to stop Nvidia, a major computer computer ship producer, from acquiring Arm (another chip producer). It was speculated that this acquisition would negatively impact innovation and possibly result in a monopoly. FTC was not the only Government regulator to scrutinize the deal, which makes me doubt the company’s promises to “[preserve] the pen licensing model and [ensure] that the IP is available to interested licensees.” I can’t think of a truly ethical and selfless business that would sacrifice making profits, so I am in support of stopping this merge—a business’s primary purpose is to make money after all.
One of the main reason that this acquisition is being followed so closely is because Arm was willing to sell their intellectual property to “nearly anyone willing to pay the licensing fee,” and were thus seen as somewhat of a “Switzerland of the semiconductor agency.” Also, because of their wide usage and low cost they have become increasingly dominant in the semiconductor business. They are used in PCs, cars (like the Tesla), and even the Nintendo Switch! The importance and scope of Arm chips is another point towards liquidating this deal.
The Federal Trade Commission, back in 2021 took action against Nvidia, one of the biggest players in the world of computing today, in its efforts to acquire Arm. This eventually led to the abandonment of what would have been an industry-defining deal and a huge stride for Nvidia in the market for semiconductor chips. This action was taken in response to the possibility for this deal to “stifle competition” and innovation in the computing world. This deal is unique because of how readily available Arm chips are in the market, and how heavily used that they are. Before Nvidia began their efforts to make the deal, Arm remained a neutral dealer that prided itself on availability and affordability. Nvidia’s acquisition would have removed the element of accessibility for many of Arm’s previous customers, and given Nvidia a near monopolistic position in the market. Thus, the deal came under scrutiny by many regulators for anti-competitive actions and antitrust violations. As it stands now, Nvidia has found a lot of usage for its chips in many devices, but still has a decent amount of competitors. Perhaps if the Nvidia-Arm deal went through, computing giants like Intel, Cisco, and AMD would have taken a backseat in the market. Because the FTC was able to get the acquisition terminated, competition still exists in the computing chip industry. Customers still have access to a diverse selection of chips with reasonable prices, something that may have been impossible in a market dominated by an Nvidia-Arm partnership. Such a market would give Nvidia no reason to innovate, as their presence in the market would allow them to set the price for their consumers. Nvidia would have the capabilities to make new advances in computing technology irrelevant – they would have the market power to prevent new players and products from finding any real traction in sales. One can only wonder what the state of computing would look like if Nvidia succeeded in this acquisition.