UK opens in-depth probe of Nvidia-ARM deal, citing national security and competition concerns

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Chipmaker Nvidia’s $40 billion purchase of UK-based chip designer ARM will face intense scrutiny by Britain’s competition regulator after the government ordered the Competition and Markets Authority (CMA) to take a closer look at the proposed transaction.

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The UK’s digital secretary, Nadi Dorries, said today that she has written to the CMA instructing it to conduct a second phase of investigation – citing competition and national security concerns.

Back in August, the government published details of the CMA’s preliminary investigation, which raised several competition concerns associated with the acquisition – saying it “significantly reduced competition” in the data centers, Internet of Things, automotive sector markets. can bring. and gaming applications.

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CMA step one report, which recommended a thorough investigation on the grounds of competition – but did not decide on the issue of national security – is published in full today.

Earlier this year, in April, the government issued an interference notice – on grounds of national security – asking the CMA to prepare a report on the implications of the transaction to help decide whether a deeper investigation was warranted. the wanted.

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Today Doris said national security interests remain “relevant” – and “should be subject to further investigation”.

Under the Enterprise Act 2002, the Digital Secretary has statutory powers toTo take a quasi-judicial decision to intervene in the merger keeping in view a handful of public interest including matters of national security.

Commenting in a statement, it said: “I have carefully considered the Competition and Markets Authority’s ‘Phase One’ report on NVIDIA’s proposed acquisition of Arm and asked them to investigate ‘Phase Two’ in further depth.” has decided.

“The branch has a unique place in the global technology supply chain and we must ensure that the implications of this transaction are fully considered. The CMA will now report to me on the basis of competition and national security and advise on next steps.

“The government’s commitment to our thriving technology sector is unwavering and we welcome foreign investment, but it is appropriate that we fully consider the implications of this transaction,” Doris said.

Nvidia has been contacted for comment on Phase 2 referrals.

The CMA will have 24 weeks (with a possible eight-week extension) to investigate phase two and report its findings to the government – ​​which means, at the very least, Nvidia’s acquisition of ARM will be considered a transaction. Months and delays are faced before getting approval.

The Digital Secretary would be required to make a decision about making an “adverse public interest search” in relation to acquisitions based on national security and/or competition – which, if she makes such a discovery, could lead to acquisitions based on public interest. is being blocked.

The final decision on the issue of national security rests with the UK foreign minister – who has 30 days after receiving the CMA’s final report to take a call.

If Doris finds no prejudicial public interest grounds for interference, she will refer the case back to the CMA – which can still advise against it on competing grounds – and/or apply the conditions to address concerns. so that it can proceed.

So there are substantial barriers to approval – with the potential for acquisitions being blocked on grounds of national security and competition, or on any one land.

Although it may eventually be approved on both grounds (although this seems unlikely on the competition front, the CMA’s phase one investigation has raised important concerns).

The deal may also be approved subject to measures (aka conditions and/or restrictions intended to address specific concerns).

Growing Concern

Nvidia’s plan to buy ARM faced immediate domestic opposition, with one of the company’s original co-founders launching a campaign by the US giant to ‘save ARM’.

The global chip crunch has only increased concerns about supply chain stability in the semiconductor sector (although ARM develops and licenses IP rather than making the chips themselves). And the European Union recently announced plans to legislate with a CHIPS Act that aims to strengthen regional sovereignty around semiconductor supply.

EU also directly investigating Nvidia-ARM deal announcement of Throwing up another road-block for the US giant late last month to do its own in-depth investigation and scoop up a UK chip designer.

In a finding similar to CMA’s Phase 1 investigation, the commission said a preliminary analysis of the Nvidia-ARM deal raised competition concerns.

“The Commission is concerned that the merged entity would have the potential and incentive to restrict access to Arm’s technology by NVIDIA’s rivals and that the proposed transaction could lead to higher prices, fewer options and less innovation in the semiconductor industry,” said the EU. executive wrote last month. “While Arm and NVIDIA do not compete directly, Arm’s IP is an important input into products competing with NVIDIA, for example in datacenters, automotive and the Internet of Things,” competition chief Margrethe Vestager added in a statement.

“Our analysis suggests that the acquisition of Arm by NVIDIA may limit or degrade access to Arm’s IP, where semiconductors are used in many markets. The purpose of our investigation is to establish whether companies operating in Europe Continue to have effective access to the technology needed to produce state-of-the-art semiconductor products at competitive prices.”

The EU has until 15 March 2022 To decide whether to approve the acquisition or not.

according to a Reuters In last month’s report, the commission was not impressed by the concessions previously made by Nvidia as it sought to avoid an intense EU scrutiny.

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