EU Opens Full Inquiry Into Nvidia’s $54 Billion ARM Acquisition

The European Union will conduct a full investigation into Nvidia’s bid to purchase ARM after concessions that the company offered earlier this month failed to assuage regulators’ concerns. While this isn’t the decision Nvidia would prefer, it’s also not a huge surprise.

Two weeks ago, news leaked that Nvidia had made unspecified early concessions as part of its offer, and that regulators had extended the deadline for the ruling until October 27 as part of their evaluation of Nvidia’s proposal. At the time, Bloomberg noted that the review was likely to run another four months and that the additional time would give the EU time to hammer out a more complex set of requirements. Today’s announcement confirms that timeline.

“Our analysis shows that the acquisition of ARM by Nvidia could lead to restricted or degraded access to ARM’s IP, with distortive effects in many markets where semiconductors are used,” said Margrethe Vestager, Commission Executive Vice-President for Competition Policy.

“Our investigation aims to ensure that companies active in Europe continue having effective access to the technology that is necessary to produce state-of-the-art semiconductor products at competitive prices.”

According to EENewsEurope, the EU is concerned that Nvidia’s purchase of ARM could allow it to degrade the market for semiconductor IP by restricting or degrading the licensing terms it offers that IP under. Nvidia has pledged to maintain the ecosystem that ARM has fostered over the past few decades during its rise to power, but the EU is also concerned that ARM licensees might be less willing to share data with Nvidia, or that Nvidia might refocus ARM R&D towards business segments that are more profitable for itself and less useful to its licensees.

Attempting to parse whether or not Nvidia has such plans could be genuinely difficult given how quickly the silicon market is changing. More workloads are likely to shift towards AI, and it would be surprising if the CPUs we buy 10 years from now don’t have some new functionality (or practical use cases) that is currently limited to the cutting edge, or doesn’t exist yet. The rise of the IoT, edge computing, and AI have pushed silicon designs in different directions.

The current silicon shortage may also be adding to concerns around this issue. While ARM is already owned by a non-European company, concerns about the EU’s ability to influence the chip foundry business and the paucity of EU-owned top silicon companies have raised more concerns around sovereignty and national security than we might have otherwise seen. Silicon’s importance in the 21st century has been compared to oil’s prominence in the 20th, and the EU has been concerned about its own inability to secure foundry manufacturing priority during the COVID-19 pandemic. TSMC and Intel have gone around several times on this one; Intel is planning a major set of investments in European production facilities, while TSMC continues to insist that these facilities are unnecessary and redundant.

There’s a lot of uncertainty roiling the semiconductor industry, but a titanic amount of long-term earnings are in play as well. Nvidia seems to think (as of this writing) that it will be able to resolve the EU regulators’ concerns in the long term. There have also been rumors that RISC-V could be a major beneficiary if Nvidia buys ARM as companies bring up new designs — but the idea that companies are hedging bets with RISC-V isn’t the same as predicting it’ll emerge as a major competitor in the near term. While the ISA continues to see strong engagement and rapid growth, we aren’t quite at the point where top-end RISC-V cores from any company are ready to challenge ARM or x86 in premium devices.

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