Chips and perception software in driver assistance systems: Qualcomm can take over Veoneer’s Arriver business

The Bundeskartellamt has today cleared plans by the US chip manufacturer Qualcomm Incorporated to take over the software division of the Swedish automotive supplier Veoneer Inc.

In early 2021, Qualcomm and Veoneer already agreed to cooperate in the area of automated driving with the aim of offering an integrated driver assistance system based, among other things, on a chip system from Qualcomm (Snapdragon Ride) and software from Veoneer under the Arriver brand. The acquired Arriver business will now provide an adequate structure for their cooperation.

Andreas Mundt, President of the Bundeskartellamt: “Integrated perception software solutions and the necessary chips play an important role in the future of driver assistance systems in the area of automated driving. Our assessment focused, among other things, on the question as to whether competitors that rely on purchasing chips or software from third parties could be squeezed out of the market following Qualcomm’s acquisition of the Arriver business. After having carried out extensive investigations, we have no competition concerns. In the course of our investigations, we also took into account that in addition to the market leader Mobileye, a subsidiary of the chip manufacturer Intel, an alternative provider of integrated solutions is now entering the market.”

At present, Mobileye is the largest provider of driver assistance systems. It is currently the only company that offers an integrated system consisting of chips and the necessary software. According to the investigations, automobile manufacturers have a great interest in seeing alternative providers enter the market. By cooperating with Arriver, this will become possible for Qualcomm.

Furthermore, there are no indications suggesting that the merger could lead to a market foreclosure in the area of chips or perception software for driver assistance systems. On the contrary, based on the investigations Qualcomm is expected to continue to offer its chips without Arriver’s perception software on the market. In the next few years, several newcomers offering perception software are expected to enter the market so that other chip manufacturers will not depend on Arriver. In addition, Mobileye’s strong position makes any foreclosure strategies pursued by the competitors seem unlikely. Lastly, the market dynamics in this sector, which tend to prevent the solidification of market positions, also had to be taken into account.

In the context of its investigations, the Bundeskartellamt surveyed approximately 30 automobile manufacturers as well as producers of chips and software for driver assistance systems worldwide. The merger could be cleared within the one-month preliminary examination period of merger control.

Merger subject to examination under merger control only due to transaction value threshold

Andreas Mundt: “This case also demonstrates the relevance of the transaction value threshold, which was incorporated into the German Competition Act (GWB) as recently as 2017. Without this provision, the merger would not have been assessed by any competition authority in Europe despite its great economic importance. The transaction was structured in a way that the turnover-related threshold values for an assessment under merger control either by the European Commission or in any of the member states were not reached. The fact that the merger was subject to examination under merger control in Germany was triggered merely by the high purchase price.”

The transaction value threshold applies if the value of the consideration exceeds 400 million euros and the target company’s operations in Germany are substantial.

Background: Systems for autonomous driving

Systems for autonomous driving form a growing market that at present already reaches a volume of approx. 30 billion euros worldwide. The share of new cars equipped with driver assistance systems will strongly increase in the coming years while at the same time the systems’ performance will greatly improve. A driver assistance system receives signals from cameras and other sensors and translates these signals into an image of the car’s surroundings (perception software). Based on this, instructions are passed on to other systems in the vehicle (drive policy software). While many automobile manufacturers develop their own drive policy software, perception software is usually purchased from third parties.