Potential Samsung-Arm Merger Deal Could Face Antitrust Hurdles

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British chip designer Arm is the talk of the town — again — in South Korea, as it emerged as Samsung Electronics’ potential merger and acquisition target.Samsung Electronics Vice Chairman Lee Jae-yong said that SoftBank Group CEO Masayoshi Son will visit South Korea next month to talk about a potential partnership or a deal.

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“When he visits, he might have some offer (regarding an Arm deal). But I am not sure,” he told reporters upon arrival at Gimpo International Airport from his two-week business trip abroad, without elaborating further.

His last stop was Britain, where the semiconductor and software design company is based, stoking years-old speculations that deep-pocket Samsung might be interested in buying Arm, to consolidate its position as a leading chipmaker and beef up its competitiveness further in the industry of growing strategic importance, reports Yonhap news agency. But he did not meet Arm executives during his visit to Britain, Lee said.

“I want to discuss a strategic alliance for Arm with Samsung,” Son was quoted as saying by Bloomberg on Wednesday night, confirming Son’s planned visit to Seoul for the first time in three years. Samsung has been eying a new M&A deal for years. At the CES 2022, Samsung Electronics Vice Chairman and co-CEO Han Jong-hee said the company was extensively reviewing M&A opportunities in various industries.

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“We are moving faster than you might think. We are open to every possibility, and I think we can deliver good news sooner or later,” he said at that time.

The last major M&A deal of Samsung, the world’s largest memory chip and smartphone vendor, came in 2016, when it acquired U.S.-based Harman International Industries, specializing in connected car solutions, for US$8 billion. Since then, speculations have been flying around, with Samsung executives reaffirming a deal is imminent. But no news has been heard on that front.

In September 2020, Nvidia, one of the world’s largest chip companies by market capitalization, and Softbank entered a mega $40 billion deal to combine Nvidia’s leading AI computing capabilities with the vast ecosystem of Arm’s central processing unit. A deal would make the two firms “advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IoT, and expand AI computing to every corner of the globe,” Nvidia said in a press release.

In February, however, what would have been the biggest chip deal collapsed because of “significant regulatory challenges.” Competition regulators in the U.S., EU, China and Britain had expressed concerns that the combination of the chip industry’s two major players could pose a major threat to fair competition.

Following the deal’s collapse, SoftBank, which acquired Arm in 2016, said it will, instead, take the chip company public by the end of next March. Even if Samsung is interested in a potential deal, it would still face the same regulatory hurdle. And Samsung is not the only chipmaker attracted to Arm’s technology and IP licensing portfolio.

In March, Park Jung-ho, vice chairman and CEO of SK hynix Inc., the world’s second-largest memory chip maker, said the company was “reviewing a possibility of forming a consortium, together with strategic partners, to jointly acquire” Arm.

“I don’t believe Arm is a company that could be bought by one company,” Park said. “I want to buy Arm, if not entirely. It doesn’t have to be buying a majority of its shares to be able to control the company,” he said.

Qualcomm CEO Cristiano Amon also said in May his company was considering creating a consortium with rivals to buy a stake in Arm in order to maintain Arm’s neutrality, given its importance in the global chip ecosystem.

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The possibility of Samsung acquiring Arm entirely on its own is “slim,” said Greg Roh, head of technology research at HMC Investment & Securities.

“Samsung is similar to Nvidia. It makes Arm-based system-on-chip (SoC) like Exynos. So the same antitrust rule will be likely applied to Samsung,” he said. “But it is still a good thing for Samsung to put many options on the table, as it repeatedly said it was actively looking for deals.”

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