Tesla, Amazon oppose Nvidia's acquisition of Arm

Nvidia CEO Jensen Huang / Captured from Nvidia Korea's webpage

By Baek Byung-yeul

U.S. graphic chip giant Nvidia's suggested multi-billion-dollar acquisition of British chip design company Arm is rattling the market as Tesla, Amazon and even Samsung Electronics were said to have strongly opposed the acquisition due to looming antitrust issues.

Citing multiple sources, U.K.-based outlet Telegraph said Samsung Electronics expressed its opposition to the U.S. Federal Trade Commission (USFTC) over Nvidia's acquisition of ARM. Also, Amazon and Tesla have voiced their suspicions of the validity of the deal to the U.S. antitrust regulator.

Established in 1990 in the U.K., Arm is a global leader in mobile chip architecture design. It generates profits by licensing its intellectual property to tech firms including Samsung Electronics, Apple and Qualcomm.

Tesla CEO Elon Musk / Reuters-Yonhap

The USFTC has started an in-depth probe into the takeover deal. Nvidia is also seeking antitrust approval from the EU for the acquisition of Arm early next month as regulators there are expected to launch a full-scale investigation after a preliminary review.

To make the deal happen, Nvidia has to receive approvals from antitrust regulators from multiple countries, including the U.S., U.K. the European Union and China as well as Korea.

In October 2020, Nvidia announced it will purchase a 100 percent stake in Arm, which is currently owned by Japan's SoftBank, for $40 billion. But the U.S. graphic chip giant was expected to face a slim chance of winning approvals from the fair trade bodies of countries with strong chip industries.

“IT companies are afraid of one company having exclusive rights over Arm's powerful and advanced chip design technology. They would rather share the benefits than have anyone stand out,” an official in the local IT industry said.

China is also expected to disapprove the deal as the country doesn't want a U.S. company to monopolize chip design technology. Arm has a complex shareholding structure. In a statement to The Korea Times, Arm said "Arm Ltd owns 49 percent shares of Arm China and the rest 51% is owned by the investment fund managed by HOPU."

The central battleground of the ongoing trade feud between the United States and China is the tech industry, as Washington thinks Beijing is trying to steal intellectual properties in industries it has identified as nationally important. China has hit a snag with its plan to become a leader in the high-tech industry such as chips and displays after Washington tightened sanctions.

Lee Seung-woo, an analyst at Eugene Investment and Securities said, “It won't be easy for the U.K. government to grant an approval considering its relationship with the U.S. Due to the relationship between the U.S. and China, chances are also slim that China would give permission too.”

As seen in the Nvidia case, higher acquisition costs and tough antitrust review processes have become major obstacles to large acquisition deals in the tech industry.

The Korea Times previously reported that Samsung was also reconsidering its earlier acquisition of Dutch-based chipmaker NXP Semiconductors due to antitrust concerns and a higher price, which is estimated at around 80 trillion won.

Samsung Electronics Vice Chairman Lee Jae-yong was released from prison and the Korean chip giant has been aiming to improve its business competitiveness by acquiring a chipmaker. And NXP, which mainly sells automotive chips, appeared as a potential target because Samsung could expect a synergy effect in the lucrative future car business. Due to these circumstances, an industry executive involved with the issue said Samsung has started “rethinking” its possible acquisition of NXP.

“NXP Semiconductors was one company on Samsung's shopping list, but the company is second-guessing its acquisition of NXP because NXP is too big,” the source said.