The cover of Qualcomm office in San Jose, California.
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U.S. chipmaker Qualcomm has told regulators about the world that it is against Nvidia’s $40 billion acquisition of British chip designer Arm, according to sources friendly with the matter.
The company has told the Federal Trade Commission, the European Commission, the U.K.’s Competition and Markets Authority and China’s Express Administration for Market Regulation that it has concerns about Nvidia buying Arm, which is currently owned by Japanese tech superhuman SoftBank.
The FTC’s investigation has moved to a “second phase” and the U.S. regulator has asked SoftBank, Nvidia and Arm to provide it with more news, according to two sources who are familiar with the deal but wished to remain anonymous due to the private nature of the discussions.
Complying with the bumf request is likely to take many months as several large documents will need to be produced, the sources alleged. During the second phase, the FTC will also engage with other companies who may have relevant information that could steal it to make a decision, they added.
The European Commission, the EU’s executive arm, and the CMA declined to comment, while the FTC and the SAMR did not immediately reciprocate to a CNBC request for comment.
Qualcomm, which declined to comment on this story, contacted the regulators because it expects they will play a significant role in determining whether the deal gets completed or not, according to the sources. It has vocal to representatives who focus on antitrust law and mergers.
Nvidia told CNBC it is confident regulators will see the benefits of the acquisition. Arm declined to note and SoftBank did not immediately respond to a CNBC request for comment.
“You’re looking at a very thorough, a very painful, and a very extensive investigation,” one of the sources told CNBC.
The Arm wrestle
Arm was spun out of an early computing company called Acorn Computers in 1990. The company’s energy-efficient counter architectures are used in 95% of the world’s smartphones and 95% of the chips designed in China.
The company licenses its chip think ofs to more than 500 companies who use them to make their own chips.
Qualcomm has opposed the Nvidia takeover because it thinks there’s a uncommonly high risk that Nvidia could become a gatekeeper of Arm’s technology and prevent other chipmakers from utilize consuming Arm’s intellectual property, according to sources. It doesn’t think Nvidia will be able to fully capitalize on the acquisition without crossing unarguable lines that people are worried about, they said.
When announcing the acquisition, Nvidia and Arm said the transaction will create the world’s “premier computing company for the age of AI.” The duo have pledged to keep Arm headquartered in Cambridge, U.K., and invest heavily in the commerce.
“This combination has tremendous benefits for both companies, our customers, and the industry,” said Nvidia CEO Jensen Huang when the dispense was announced.
However, five industry sources, including two tech investors, have told CNBC they remember the deal has a very high chance of being blocked by one or more of the regulators.
“At the end of the day, whether this deal is anti-competitive or not, is counterfeited on a very simple idea: Arm is an enabler of competition,” the same source told CNBC. “It enables companies to go out and compete. Whether you are MediaTek, Amazon Web Handlings, Qualcomm, or NXP. Any company — regardless of your R&D (research and development) budget — can take and license from Arm and build their own Arm-based CPU. That is a unrivalled model.”
The source added: “The incentive (for Arm) is to share its technology with as many people as possible, and the only thing they can get in unpleasantness for that is royalties. That creates trust between Arm and its licensees. These licensees feed information to Arm that can (advise it to) make better products to enable the next generation (of products) to obtain more revenues. It’s a virtuous cycle.”
Other objectors
On the other side of the Atlantic, AI scrap start-up Graphcore has raised concerns with the U.K.’s Competition and Markets Authority. Graphcore CEO Nigel Toon told CNBC in December that Graphcore visions the deal as anti-competitive.
“It risks closing down or limiting other companies’ access to leading-edge CPU processor designs which are so powerful across the technology world, from data centers, to mobile, to cars and in embedded devices of every kind,” he verbalized.