UK announces national security probe of Nvidia’s $54 billion Arm deal

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The British government has launched a thorough investigation into Nvidia’s acquisition of UK-based technology company Arm on national security grounds, putting another hurdle in the way of a $54 billion deal.

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Digital and Culture Secretary Nadine Dorries has ordered a Phase 2 investigation into the transaction based on public interest, meaning it will now be subject to a full investigation into antitrust and security issues. The UK competition watchdog revealed “serious competition concerns” with the deal in July.

In a letter to the parties published on Tuesday, the government said: “The Secretary of State believes that the ubiquity of Arm technology makes the accessibility and reliability of Arm IP essential to national security.”

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Arm’s chip design is used by almost all smartphone makers.

The government said the National Cyber ​​Security Center has also identified “multiple potential risks to national security” as a result of the deal.

In a statement, Doris said that Arm “has a unique position in the global technology supply chain and we must ensure that the implications of this transaction are fully considered.”

Nvidia last year agreed to buy the Cambridge-based arm—once one of the crown jewels in Britain’s tech sector—from Japan’s SoftBank in the biggest deal ever in the global semiconductor industry. The bid has since been mired by regulatory scrutiny in the UK, Brussels and China, forcing Nvidia to admit in August that it was unlikely to be able to approve the deal within 18 months, as it did. was expected.

Nvidia said on Tuesday: “We plan to address CMA’s initial views on the impact of transactions on competition, and we will continue to work with the UK government to address our concerns.” It said the deal would help “accelerate the branch, including the UK, and promote competition and innovation.”

Arm’s designs use 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” with the deal over the summer, claiming Nvidia could harm competitors by cutting off access to Arm’s technology or raising prices. Nvidia has promised to maintain an open licensing model and chief executive Jensen Huang has said that they have no intention of “throttling” Arm’s supply to any customers.

The CMA will now have 24 weeks to conduct its investigation before giving a final report to the government, and may extend that deadline by another eight weeks.

Regulators in the EU are also concerned that Nvidia could undermine its rivals and stifle innovation through the purchase of Arm. The deadline for that investigation is March 15, 2022, although that could be extended, pushing the deal’s deadline further.

Launching the investigation last month, Margrethe Vestager, the EU’s executive vice president in charge of competition and digital policy, said: “Our analysis shows that Arm’s acquisition by Nvidia may result in restricted or degraded access to Arm’s IP with distorted implications. Could be the reason. In many markets where semiconductors are used.”

Despite regulatory pressure, Masayoshi Son, chief executive of SoftBank, the Japanese owner of Arm, told investors earlier this month that he expected the deal to be approved. During an earnings call, he said: “Regulators want the review to be very careful, and they have moved on to the second phase, but I still believe the review should be completed successfully.”

Additional reporting by Javier Espinoza in Brussels

© 2021 The Financial Times Limited, All rights reserved Not to be redistributed, copied or modified in any way.

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