Qualcomm opposes Nvidia’s $ 40 billion acquisition

U.S. chipmaker Qualcomm has told regulators around the world that it opposes Nvidia’s $ 40 billion acquisition of British chip designer Army, according to sources familiar with the matter.

The company has told the Federal Trade Commission, the European Commission, the UK Competition and Markets Authority and the Chinese State Administration for Market Regulation that they have concerns about Nvidia buying Arm, which is currently owned by Japanese tech firm SoftBank .

The FTC’s investigation has moved to “second-rate” and the U.S. regulator has asked SoftBank, Nvidia and Army to provide him with more information, according to two sources familiar with the deal but who wished to remain anonymous because of the private nature of the conversations.

Compliance with the information request is likely to take many months as a number of major documents must be produced, the sources said. During the second phase, the FTC will also communicate with other companies that have relevant information that could help them make a decision, they said.

The European Commission, the EU branch of action, and the CMA declined to comment, while the FTC and SAMR did not immediately respond to CNBC’s request for comment.

Qualcomm, which declined to comment on this story, contacted the regulators because they believe they will play a major role in determining whether the deal is finalized or not, according to the sources. He has spoken to representatives who focus on anti-trust law and unions.

Nvidia told CNBC it is confident regulators will see the benefits of the build. Army declined to comment and SoftBank did not immediately respond to CNBC’s request for comment.

“You’re looking at a very detailed, very painful, and very lengthy study,” one of the sources told CNBC.

An arm was spun out of an early computer company called Acorn Computers in 1978. The company’s energy-efficient chip architecture is used in 95% of the world’s smartphones and 95% of the world’s smartphones. slits designed in China.

The company allows its chip designs to more than 500 companies that use them to make their own chips.

Qualcomm has opposed Nvidia’s takeover because it believes there is a significant risk that Nvidia could become a gateway to Army technology and prevent other chip makers from using Army intellectual property, according to stores. He doesn’t think Nvidia can take full advantage of the purchase without going over certain lines that people are concerned about, they said.

Announcing the build, Nvidia and Army said the deal will create the “leading computer company in the world for the AI ​​age.” Both have pledged to keep Army headquartered in Cambridge, UK, and invest make a big difference in the industry.

“This combination has tremendous benefits for both companies, our customers and the industry,” Nvidia CEO Jensen Huang said when the deal was announced.

However, five business sources, including two technical investors, have told CNBC that they believe the deal has a good chance of being blocked by one or more of the regulators.

“At the end of the day, whether or not this agreement is anti – competitive is based on a very simple idea: the Army has the potential to compete,” the same source told CNBC. “It enables companies to go out and compete. Whether you’re MediaTek, Amazon Web Services, Qualcomm, or NXP. Any company can – whatever the R&D budget (research and development) – permission from Army and build their own Army- CPU based. That’s a special model. “

The source said: “The incentive (for the Army) is to share its technology with as many people as possible, and the only thing they can get in exchange for that is kingdoms. That creates trust between the Army and These licensees feed information to the Army that can (help) produce better results to allow the next generation (of results) to generate more revenue. it is a virtuous circle. “

On the other side of the Atlantic, AI chip startup Graphcore has raised concerns with the UK Competition and Markets Authority. Graphcore CEO Nigel Toon told CNBC in December that Graphcore sees the deal as anti-competitive.

“There is a risk of shutting down or restricting other companies’ access to CPU processor designs that are so important in the world of technology, from data centers, to mobile, to cars and in rooted devices of all kinds,” he said.

Local chipmakers in China are urging Huawei to urge Beijing to try to block the deal for fear they could be disadvantaged if an Army ends up in the hands of an outsourced company in the US.

An Nvidia spokesman told CNBC: “As we progress through the review process, we are confident that both regulators and customers will see the benefits of our plan to continue with the Army ‘s open licensing model. and ensuring a transparent, collaborative relationship with Army licensors. Our vision for Army franchisees will help their businesses expand and expand into new markets. “