Small is seldom beautiful when it comes to the chipmaking business.
Given the enormous amounts of capital required to set up chip foundries, it’s no small wonder that the costly endeavor of making chips has largely been left to a handful of companies, including Intel (+1.90%), TSMC (+0.80%) and Samsung Electronics.
Chip design on the other hand is a high-margin and lucrative business – which is what firms like Nvidia and the United Kingdom-based Arm are involved in.
Whereas Nvidia specializes in chips for graphics processing and data centers, Arm is a designer-for-hire and will be designing Apple’s (+0.18%) next generation of chips for its personal computers.
The marriage of Nvidia and Arm then would seem a natural union – like peanut butter and jelly.
But not if U.S. competition authorities have a say in it, with the U.S. Federal Trade Commission opening an in-depth review over Nvidia’s planned acquisition of Arm.
Regulators in the United Kingdom and Europe are also opening their own independent inquiries into the deal, with China potentially objecting to the Nvidia acquisition.
Arm’s designs are the secret sauce in the majority of smartphones given their low power consumption, a capability that Nvidia is looking to deploy into its data center chips just as demand for cloud computing and artificial intelligence is soaring, requiring more energy-efficient processors.
Competitors worry that if allowed to acquire Arm, Nvidia could potentially favor its own data center needs over that of others as well as gain access to sensitive information over its rivals as Arm would necessarily share its future product plans with its parent.
While Nvidia has sought to reassure both rivals and regulators alike that it has no intention of doing so, and will continue to allow Arm to run independently, such promises are just that – promises.
Nonetheless, recent chip shortages in the U.S. which saw vehicle production lines ground to a halt may prompt the Biden administration to bless the marriage, in an attempt to reassert America’s superiority in the chip business.
While the majority of chipmaking is still dominated by TSMC and Samsung Electronics, the U.S. still leads the world in chip design and the acquisition of Arm could cement that lead even further.
As such, while Nvidia may face several levels of regulatory challenges, the odds are good that it will be able to close the deal.
It helps that the U.K. has also just recently separated from the European Union too, meaning that while the E.U. may voice its objections, the final blessing will ultimately come from Nvidia and Arm’s parents – U.S. and U.K. regulators.