FTC sues to stop blockbuster chip deal

WASHINGTON» The Federal Trade Commission on Thursday sued to block Nvidia’s $40 billion acquisition of a fellow chip company, Arm, halting what would be the biggest semiconductor industry deal in history, as federal regulators push to rein in corporate consolidation.

The FTC said the deal between Nvidia, which makes chips, and Arm, which licenses chip technology, would stifle competition and harm consumers. The proposed deal would give Nvidia control over computing technology and designs that rival firms rely on to develop competing chips.

“Tomorrow’s technologies depend on preserving today’s competitive, cutting-edge chip markets,” said Holly Vedova, director of the FTC’S competition bureau. “This proposed deal would distort Arm’s incentives in chip markets and allow the combined firm to unfairly undermine Nvidia’s rivals.”

In a statement, Nvidia said it would contest the FTC lawsuit. “We will continue to work to demonstrate that this transaction will benefit the industry and promote competition.”

Arm, a British company that Japanese conglomerate Softbank bought in 2016, licenses designs for microprocessors and other technology that other companies use in their semiconductors. Its technology has been wildly successful, providing the calculating functions in essentially all smartphones and many other devices. Arm recently estimated its technology is used in about 25 billion chips per year.

Nvidia, based in California, is a dominant provider of chips used to render graphics in video games, technology it has adapted in recent years to power AI applications used by cloud companies and self-driving cars.

Jensen Huang, the company’s CEO, has been pushing the company to become a broader, “full stack” provider of computing technology.

But the deal was controversial from the start, with some of Arm’s big customers, such as Qualcomm, worried about the heightened competition from Nvidia and the possibility of a rival gaining access to confidential information.

The deal had attracted close scrutiny from regulators in Europe, particularly in the United Kingdom, where Arm’s headquarters in Cambridge is a major employer. Britain’s Competition and Markets Authority launched an in-depth inquiry into the transaction in November, citing competition and national security concerns.

The vote to block the merger was unanimous among the FTC’S commissioners. The full complaint filed by the agency is not expected to be released for a few days. An administrative trial for the lawsuit is scheduled for May 10.