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Nvidia/Arm: Competitions and Markets Authority to drill down further in Phase 2 investigation

The merger between Arm and Nvidia is to be investigated further following publication of the CMA’s Phase 1 report into the deal

Digital secretary Nadine Dorries has asked the Competition and Markets Authority (CMA) to carry out a Phase 2 investigation into Nvidia’s takeover of Arm on national security and competition grounds.

In September last year, Nvidia announced its plans to acquire Cambridge-based Arm for $31bn to flesh out its artificial intelligence (AI) strategy. At the time, Nvidia CEO Jensen Huang said: “We would like to create the computing company for the age of AI.”

Chips based on Arm’s intellectual property (IP) power smartphones and internet of things (IoT) devices in homes, cars and businesses.

In August, the CMA completed  an initial investigation of the Nvida/Arm deal and found that the transaction raised the possibility of a “substantial lessening of competition across four key markets” – datacentres, IoT, the automotive sector and gaming applications.

The full Phase 1 report has now been published. Among its key findings is that Arm’s CPU IP is an important input for SmartNIC suppliers, and that Arm has market power in relation to the supply of CPU IP for SmartNICs given its predominance, the lack of credible alternatives and the difficulties for licensees to switch suppliers.

Although not all individual devices relying on Arm-based chips are necessarily classed as “critical” in themselves, Dorries believes the security and resilience of the broader supply chain is important for UK national security.  

She said: “I have carefully considered the Competition and Markets Authority’s ‘Phase 1’ report into Nvidia’s proposed takeover of Arm and have decided to ask them to undertake a further in-depth ‘Phase 2’ investigation.

“Arm has a unique place in the global technology supply chain and we must make sure the implications of this transaction are fully considered. The CMA will now report to me on competition and national security grounds and provide advice on the next steps. 

“The government’s commitment to our thriving tech sector is unwavering and we welcome foreign investment, but it is right that we fully consider the implications of this transaction.” 

In the Phase 1 report, the CMA found significant competition concerns as a result of the effect of limiting the supply of CPUs, interconnect products, GPUs and SoCs (systems on a chip) to rival chipmakers. The specific areas of concern for the CMA cover: the supply of CPUs for datacentre servers globally; the supply of network-interface controllers for datacentre connectivity; the supply of GPUs for datacentre servers and the supply of SoCs components.

As regards SoCs, the CMA was concerned that the deal could impact: the supply of SoCs for high-performance IoT applications; automotive applications such as advanced driver assistance systems applications and information and entertainment applications; and the supply of SoCs for gaming consoles.

The CMA will now lead the Phase 2 investigation covering both competition and national security. It will have 24 weeks – subject to a possible eight-week extension – to conduct this investigation and deliver a final report to the digital secretary.

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