Most industry watchers think that antitrust agencies will ask some hard questions of Nvidia’s $40 billion acquisition of Arm, the largest chip deal ever and one that would put control of the entire mobile CPU industry in Nvidia’s hands.

That Arm holds a virtual monopoly in the smartphone industry is unquestioned—practically every smartphone made includes some derivative of an Arm chip design. Arm designs the fundamental CPU architecture and associated logic, then licenses it to companies like Qualcomm and Apple. Those licensees can modify the design according to the terms of the contract, then manufacture them.

Owning the underpinnings of every smartphone on the market would give Nvidia enormous power, theoretically allowing it to play favorites. It would also give Nvidia the ability to shape Arm development in the server industry, potentially striking favorable deals for companies building Arm servers with Nvidia GPUs.

Jensen Huang, Nvidia’s chief executive, doesn’t see it that way. In a conference call with analysts on Sunday, Huang offered a lengthy argument that owning Arm’s intellectual property will complement Nvidia’s existing businesses, and help Arm accelerate its own technology roadmap. He pointed to the company’s acquisition of networking powerhouse Mellanox, a mere $7 billion transaction that was signed in March and completed this past April.  

A surprise argument for an antitrust investigation

The argument for a strong antitrust investigation has been essentially made by… Arm’s co-founder. Hermann Hauser told the BBC that Softbank, the Japanese conglomerate that plans to sell Arm to Nvidia in a potential $40 billion deal, was essentially neutral in terms of licensing Arm’s technology to companies like Apple, Qualcomm, and Samsung. Because Softbank is a massive conglomerate spanning multiple industries, Arm’s licensing practices were essentially neutral.

Under Nvidia, the company will be licensing Arm technology to Nvidia’s rivals—implicitly threatening Arm’s neutrality, and raising doubts that those companies will be treated equally, Hauser said. “If it becomes part of Nvidia, most of the licensees are competitors of Nvidia, and will of course then look for an alternative to Arm,” Hauser said.

The argument then, of course, will be: what alternative? In the server market, that would mean Intel, AMD, Arm, and a small coterie of Chinese processor suppliers. RISC-V is growing as a royalty-free alternative to Arm, but remains relatively small at this point. In the smartphone market, there’s little choice besides Arm. 

Huang: Nvidia and Arm are “complementary”

Huang, of course, thinks differently. In a Sunday evening call with analysts, Huang sad that he believes that regulatory agencies are “logical,” and “are about protecting competition in the markets.”