UK launches deep probe into US chip company buying VMware

By Al Mayadeen English
Source: Agencies
29 Mar 2023 16:53

The competition authority raised concerns that the massive acquisition will lead to a rise in the prices of PC parts and software.

A smartphone with a displayed Broadcom logo is placed on a computer motherboard in this illustration taken March 6, 2023 (Reuters)

UK will launch an in-depth investigation over the selling of cloud tech VMware to US chipmaker Broadcom for fears that it will undermine the competitiveness of British goods and services, AFP reported on Wednesday.

The $61 billion acquisition offer "may be expected to result in a substantial lessening of competition" for domestic businesses, UK's Competition and Markets Authority (CMA) said on Wednesday.

Broadcom has failed to address the CMA's concerns within a five-day time limit, forcing it [CMA] to proceed with a second deep probe, the first one being last year.

The acquisition might “lead to less innovation and drive up the cost of computer parts and software,” the completion authority added.

In December 2022, the EU started its own deep investigation into the deal as concerns regarding the gradual yielding of competition in favor of rising monopolies in the server sector.

American Broadcom earlier acquired CA Technology and Symantec - tech firms that offer complimentary services - in an attempt to expand its software market reach.

Following Broadcom's offer to buy out VMware in May 2022, the semiconductor company said it wants to offer clients "greater choice and flexibility to build, run, manage, connect and protect applications at scale".

The company's offer gives VMware shareholders the option to either receive $142.50 or exchange each VMware share for a quarter share in Broadcom.

“Broadcom [could] cut out competitors from the supply of hardware components to the server market and lead to less innovation at a time when most firms want fast, responsive and affordable IT systems," the CMA chief said on Wednesday.

Semiconductors, more commonly known as chips, are a highly pivotal component in the defense industry, especially as it shifts and takes a more modern approach that delves into the futuristic realms requiring advanced semiconductors, which are key in manufacturing many things, from computers to autonomous vehicles, and even hypersonic weapons.

In recent months, relations between the EU and the US have witnessed tensions. In November 2022, the EU condemned the subsidies offered to American companies in President Biden’s Inflation Reduction Act, giving them unfair leverage over their European rivals.

In October 2022, German Chancellor Olaf Scholz and French President Emmanuel Macron agreed that American subsidy plans will end up distorting the market, as they intend to sway companies to shift production to the US.

The UK has already announced it joined the EU in opposing the Act, but European leaders have been scrambling for ways to push for amending the IRA.

Unlike trading partners with the EU, the IRA has exemptions set for products from its NAFTA partners, and the EU has been calling for these exemptions to be extended to the EU.