The U.K. has opened a formal investigation into Nvidia’s $40 billion takeover of chip designer Arm, after the government said the deal could have national security implications.
Digital secretary Oliver Dowden on Monday issued a public interest intervention notice relating to the proposed deal and requested that the U.K.’s Competition and Markets Authority (CMA) prepare a report on the implications of the deal.
“Following careful consideration of the proposed takeover of Arm, I have today issued an intervention notice on national security grounds,” Dowden said in a statement.
“We want to support our thriving U.K. tech industry and welcome foreign investment, but it is appropriate that we properly consider the national security implications of a transaction like this,” he added.
Shares in Nvidia
fell more than 2% in early trading on Monday.
Santa Clara, Calif.-based Nvidia struck a deal with Japan’s SoftBank Group
in September 2020 to buy Arm, in a move designed to transform the global semiconductor landscape. Arm licenses its chip designs to companies including Apple
Samsung, and Qualcomm
which use these chips to power device processors globally.
As a neutral supplier, Arm supplies critical chip technology to a variety of customers, including Nvidia’s rivals, and Nvidia has pledged not to change this business model. Nvidia has also promised to add its own technology to the portfolio of intellectual property that Arm can license.
Critics have also warned that Nvidia, which in July 2020 overtook Intel
as the most valuable U.S. chip maker by market capitalization, would become too dominant if the Arm acquisition is approved.
The CMA had already launched a standard investigation into the deal in January, saying it was “likely to consider whether, following the takeover, Arm has an incentive to withdraw, raise prices or reduce the quality of its IP licensing services to Nvidia’s rivals.”
The competition watchdog has until July 30 to complete and submit its report to the digital secretary, who will either give the takeover the green light, approve it with certain conditions, or refer it for further scrutiny, either on public interest and competition grounds or on public interest grounds alone.
A spokesperson for Nvidia said the company didn’t believe the transaction poses any material national security issues. “We will continue to work closely with the British authorities, as we have done since the announcement of this deal,” the spokesperson added.
The U.K. intervention in the deal comes just five months after the government introduced new powers to prevent overseas companies from buying the country’s sensitive assets, amid growing concern about the impact of China’s growing economic power.
Under the National Security and Investment Bill, companies will have to notify the government about proposed deals in 17 sectors deemed of strategic importance, including computer processing units and artificial intelligence. Ministers were also given the power to scrutinize the acquisition of assets and intellectual property, as well as companies themselves.