UK government to review Nvidia’s $ 40 billion arms deal

The UK has launched an official investigation into Nvidia’s $ 40 billion buyout of British chip designer Arm after the government said the deal could create national security concerns.

Oliver Dowden, the culture secretary, said he wrote to the French Competition and Markets Authority to inform them of his decision and asked them to open a “phase one” investigation to assess the transaction , first announced in September.

The competition regulator will prepare a report by the end of July with advice on jurisdictional and competition issues, as well as a summary of potential national security concerns. Then Dowden could clear the acquisition, approve it under certain conditions, or launch a more detailed investigation.

The deal raises potential security concerns, as semiconductors are the basis of defense-related technologies.

“After careful consideration of the proposed takeover of Arm, I issued a notice of national security intervention today,” said Dowden. “We want to support our thriving UK tech industry and welcome foreign investment, but it is appropriate that we properly consider the national security implications of a transaction like this.”

However, lawyers said the government’s decision to call for a deal between Arm and Nvidia was also a sign of a growing focus on industrial strategy and the protection of UK national interests.

Becket McGrath, an antitrust partner at Euclid Law, said: “What’s interesting here is that the deal is not a classic defense-driven national security affair.”

He said national security interventions had become “more common in recent years” following the rise of “economic nationalism and the industrial strategy agenda”.

Arm is sold by SoftBank of Japan, which initially bought the semiconductor business in 2016. SoftBank’s decision to sell the group to Nvidia has raised concerns over whether the US group will retain its Cambridge headquarters beyond. short term.

Jensen Huang, chief executive of Nvidia, has said he intends to keep the Arm name while expanding its base in Cambridge and keeping its intellectual property registered in the UK.

If Dowden chose to advance the investigation beyond the initial phase, a “phase two” investigation would examine the agreement further, either for reasons of public interest and competition, or solely for reasons of competition. public interest.

A spokesperson for the CMA said its assessment of competition “would include a consideration of whether, after the takeover, the merged entity is able and has an incentive to pull out, increase prices. price or reduce the quality of its IP licensing services to rivals Nvidia ”.

Arm declined to comment. Nvidia said, “We do not believe this transaction poses significant national security concerns. We will continue to work closely with the British authorities, as we have done since the announcement of this agreement.

However, Atif Malik, analyst at Citigroup, said that careful consideration of the complex antitrust and national security concerns surrounding the successful deal reduced the chances of its success.

“This makes the approval process more complicated and increasingly unlikely. We are lowering our probability of closing a deal from 25% to 10%, ”he said.

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