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The UK government has launched an in-depth investigation into Nvidia’s acquisition of UK-based tech company Arm for national security reasons, throwing another hurdle in the path of the $54 billion deal.
Nadine Dorries, Minister for Digital Affairs and Culture, has ordered a Phase 2 investigation into the transaction for reasons of public interest, meaning it will now be subject to a full investigation into antitrust and security issues. The British competition watchdog raised ‘serious competition concerns’ with the deal in July.
In a letter to the parties published Tuesday, the government said: “The Secretary of State believes that the ubiquity of Arm technology makes the accessibility and reliability of Arm IP necessary for national security.”
Arm’s chip designs are used by almost all smartphone manufacturers.
The government said the National Cyber Security Center had also identified “a number of potential risks to national security” as a result of the deal.
In a statement, Dorries said Arm holds a “unique place in the global technology supply chain, and we need to ensure the implications of this transaction are fully considered.”
Nvidia agreed last year to buy Cambridge-based Arm – once one of the crown jewels in Britain’s technology sector – from Japan’s SoftBank in the biggest deal ever in the global semiconductor industry. The bid has since been stalled by regulatory investigations in the UK, Brussels and China, forcing Nvidia to admit in August that it was unlikely to approve the deal within 18 months as it had hoped.
Nvidia said on Tuesday: “We intend to address the CMA’s initial views on the transaction’s impact on competition, and we will continue to work with the UK government to address its concerns.” It said the deal “would help accelerate Arm and boost competition and innovation, including in the UK.”
Arm’s designs are used devices, including smartphones, smart TVs and self-driving cars, and are heavily relied upon by Nvidia’s rivals – something regulators find problematic. The Competition and Markets Authority found “serious competition concerns” over the deal over the summer, alleging that Nvidia could harm competitors by cutting off access to Arm’s technology or raising prices. Nvidia has pledged to maintain an open licensing model, and Chief Executive Jensen Huang has said he has no intention of “stopping” delivery of Arm to any customer.
The CMA now has 24 weeks to conduct its investigation before delivering a final report to the government, and can extend that time frame by another eight weeks.
EU regulators are also concerned that Nvidia could undermine its rivals and dampen innovation through the purchase of Arm. The deadline for that investigation is March 15, 2022, although it could be extended, further pushing the timeline of the deal.
Margrethe Vestager, EU executive vice president with responsibility for competition and digital policy, said last month when launching the study: “Our analysis shows that Nvidia’s acquisition of Arm could lead to limited or impaired access to Arm’s IP, with disruptive effects in many markets where semiconductors are used.”
Despite regulatory pressure, Masayoshi Son, the CEO of Arm’s Japanese owner SoftBank, told investors earlier this month that he expected the deal to be approved. During an earnings call, he said: “Regulators want to assess very carefully and they have entered the second phase, but I still believe that assessment should be successfully completed.”
Additional coverage by Javier Espinoza in Brussels.
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