Original title: The Anglo-American chip giants merge, and the EU, in a dilemma, is very worried
Recently, American chip giant NVIDIA’s plan to acquire British chip design company ARM has received widespread attention in Europe. Once Nvidia successfully completes the acquisition of ARM with a huge sum of US$40 billion, it will seriously threaten the EU’s independent development of chips. To this end, Brussels is considering the use of all options including “nuclear means”-vetoing the acquisition on antitrust grounds.
In an interview with the US media, European Commission member Breton, who is in charge of the internal market, said that he is “watching” this transaction and the EU “extremely understands” the strategic significance behind it.
Why is the EU so worried?
Breton has always portrayed himself as the guardian of EU chips and other high-tech industries. In his view, the challenges brought about by the merger of manufacturer Nvidia and design company ARM are obvious. According to a report by the US political news website Politico on June 1, Breton regarded the merger of the two giants as a major influence on “whether the 27 member states can develop an independent semiconductor industry in Europe.”
Nvidia announced its acquisition plan for ARM in September 2020. ARM’s chip designs are provided to more than 500 companies, including American giants such as Intel, Nvidia, and Apple, but also European chip manufacturers such as STMicroelectronics and NXP Semiconductors. In addition, ARM has a large number of intellectual property rights in the Internet of Things, artificial intelligence, high-performance computing and other fields, and these are also areas where the EU hopes to focus on cultivating local giants in the next ten years.
From the perspective of the European Union, once the two companies from the United States and Britain merge into one, it will further strengthen the United States‘ control over the high-tech industry chain. This is extremely undesirable for the European Union. Just as the whole of Europe is struggling to promote economic recovery after the new crown epidemic, if it “loses ground” in the industrial chain, it is likely to jeopardize the effectiveness of EU industrial policies.
Xinhua News Agency previously reported that the total share of the global semiconductor market is 440 billion euros, and the EU accounts for about 10%. The new crown epidemic has made the EU’s dependence on chips and other products more prominent.
Two unnamed EU officials revealed that Breton personally would like to see Nvidia’s acquisition of ARM eventually be rejected by the European Commission, but the decision on this matter is not with him, but with his colleagues, “anti-monopoly”. Commissioner Vestag, the Queen. On the EU’s industrial policy, he and Vestag do not agree completely.
According to a report on the “Technology Europe” website in February 2021, the German government expects that Germany, France and 17 other EU countries will inject tens of billions of euros into the European chip industry in the next few years in order to safeguard Europe’s “technical sovereignty.”
Then the German Minister of EconomyAltMeyer and French Finance Minister Le Maire said at a meeting that this project was named “Important Plan for Common European Interests” and aimed to promote the development and design of processors and semiconductors-key equipment for the Internet of Things and data processing. And manufacturing investment. He predicts that the project will require 50 billion euros of investment, of which 60% to 80% will come from participating companies, and the other 20% to 40% will come from EU subsidies.
The German “Business Daily” commented that Altmaier and Le Maier are working with the European Commission to promote a series of industrial policy plans, in addition to chips, including battery manufacturing, hydrogen energy, cloud computing and artificial intelligence. These are all for the gradual realization of the EU’s ideal of “technical sovereignty” and to reduce its dependence on the United States and China in the medium and long term.
Veto a takeover case: who opposes and who supports it?
In addition to Breton, there are many voices within the European Union calling for a veto of the acquisition. Pete Mandelson, a former European Commission member who is currently engaged in the political and business consulting industry and the British Secretary of Commerce, strongly advocated that the European Union block mergers and acquisitions. He bluntly stated in October last year, “The only one who has the ability and political will to oppose this merger at the antitrust level is the European Union.”
US high-tech giants such as Microsoft and Google also clearly oppose the merger of the two chip companies because they fear that Nvidia’s acquisition of ARM may prevent other chip manufacturers from using the latter’s patents. Some companies are worried that Nvidia will tilt its design resources to its own chips after the acquisition.
The application for this acquisition is currently being processed by regulatory agencies in the United States and the United Kingdom. The British government requires the Competition and Market Supervision Authority (CMA) to investigate whether the acquisition will affect national security. The EU has not officially started the review, but EU officials revealed that Nvidia has contacted EU regulators.
Politico reported that some EU officials believe that the European Commission also has reasons to release the acquisition, because Nvidia and ARM are in different positions in the industry chain, and the two mergers are vertical mergers rather than horizontal mergers, and the latter often easily lead to anti-monopoly regulatory authorities. Attention.
Professor Cromo from the London School of Economics and Political Science explained from an industry perspective that vertical mergers often make it difficult for regulators to act, because such behavior by itself will not expand the acquirer’s control over the entire market, unless the European Commission finds that there will be some Kind of greater harm.
However, market factors are not all considered by the European Commission. Right now, the EU’s fear of relying on others economically is growing, and the two major economic engines of the EU, Germany and France, are striving to get rid of their dependence on American chips. At the beginning of May this year, the European Union released a working paper on the evaluation of the economy’s external dependence. In terms of integrated circuit design, which is crucial to chip manufacturing, the European Union has “highly relied on the United States.” Almost all high-end chips used by European companies need to be imported from the United States. In the cloud computing, automotive and communications industries, European companies have begun to complain that it is increasingly difficult to obtain chips from the United States.
During the administration of former US President Trump, the US government imposed export controls on many high-tech products that used US intellectual property rights, which directly threatened the EU’s exports of high-tech products to the outside world. If ARM is acquired by the US, it will only continue to increase the US’s influence on European companies.
Because of this, Breton commented that “By getting involved with ARM, Nvidia will enable the US government to fully control the industrial chain of emerging industries, including but not limited to the Internet of Things, supercomputing and cloud computing.”
However, if the EU takes this action, it will also bring about a big reputation crisis. Politico analyzed that if Vestag decides to block the merger, all parties will criticize the EU for putting its industrial strategy above antitrust rules. If Vestag gave the green light, while the regulatory agencies of the United Kingdom and other countries turned on the red light, this would make the EU’s supervision appear too weak and inefficient, and thus bring higher prestige to institutions like the British CMA. , To further weaken the authority of the EU antitrust agency in global market supervision.
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