UK orders national-security probe of Nvidia-Arm deal

It would be appropriate to 'properly consider the national security implications of a transaction like this', says Oliver Dowden

The government has ordered a national security review of US group Nvidia ' s $40 billion deal to acquire British chip designer Arm Holdings from Japan ' s SoftBank Group (SBG).

UK Digital Secretary Oliver Dowden on Monday issued an intervention notice instructing the Competition and Markets Authority (CMA) to review the security implications of the deal, which is raising concerns that it would give Nvidia too much control over a major UK IT tech supplier.

The report, which will cover potential national security issues, as well as jurisdictional and competition issues posed by the deal, is due by 30th July 2021.

The ' phase one ' inquiry will review whether the deal results in a significant reduction of competition in any market in the UK, and whether "it would be appropriate to deal with any concerns through undertakings by the parties involved in place of a referral to a ' phase two ' investigation."

After the review is complete, the digital secretary will decide whether to clear the deal, with or without conditions, or order a "phase two" investigation, which will review the deal in more depth.

If the government determines that there are no public interest concerns, but there are competition issues based on the CMA ' s report which cannot be addressed by undertakings, then the digital secretary will order the CMA to deal with the merger as an ' ordinary ' merger case.

If a ' phase two ' referral is made based on public interest concerns, the regulator will assess further whether the deal raises public interest concerns and make recommendations as to what the Digital Secretary should do to remedy any adverse effects.

"At the end of a phase-two investigation the digital secretary has the power to take action to remedy, mitigate or prevent any effects adverse to the public interest," the government said in its press release.

Dowden said that the government wants to support UK's thriving tech sector, but it would be appropriate to "properly consider the national security implications of a transaction like this".

Nvidia said that it does not believe the acquisition poses any national security issues for the UK.

British chip designer Arm is currently owned by Japan ' s SoftBank, and its chip designs are widely used by various smartphone makers, as well as in data centres, laptops and IoT devices.

In September, Nvidia, the largest US chip firm by market capitalisation, announced that it had entered an agreement with SBG to buy Arm for $40 billion. Following the takeover, Arm will operate as a division of Nvidia. The US firm has promised to provide Arm more support for its R&D efforts, as well as access to its entire suite of products.

Because Nvidia is a licensee of Arm chips, the deal has triggered concerns among other licensees, who are worried about the potential impact of the deal on Arm's long-standing position as a neutral supplier.

Earlier this year, the CMA said that it was inviting views from other companies and organisations on the impact of the deal on competition in the UK.

"The CMA will look at the deal's possible effect on competition in the UK. The CMA is 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 regulator said in January.

In February, Bloomberg reported that the US Federal Trade Commission (FTC) had also opened an in-depth probe into Nvidia-Arm deal.

The report claimed that Qualcomm, Google and Microsoft have complained to US antitrust regulators about the mammoth merger, stating that it could harm competition in the market.

Bloomberg sources also said that at least one of three companies wants the deal to be killed.