UK leaning towards blocking Nvidia’s Arm deal — reports

By Anne Morris

The planned $40bn merger could be in jeopardy over national security concerns.

The UK Competition and Markets Authority (CMA) delivered its first report on the planned acquisition of British chip designer Arm by US-based Nvidia around ten days ahead of the 30 July deadline. Now, the word on the street is that the UK government is leaning towards blocking the proposed $40 billion semiconductor consolidation on the grounds of security concerns.

Reports on this latest development from the likes of Bloomberg News, where the story seems to have appeared first, and the Financial Times currently cite unidentified sources, and it has not been confirmed as yet whether or not the proposed deal is likely to be scuppered. However, it is certainly the case that the government has been concerned about the number of takeover bids for strategic British firms such as Arm.

Arm is already owned by Japan’s SoftBank, but has retained its global headquarters in Cambridge, England. Its semiconductors are used in defence-related technologies as well as smartphones and other equipment, and security is regarded as a primary issue here.

All eyes on Dowden

The CMA kicked off its investigation in January following the launch of an in-depth probe by the US Federal Trade Commission last December. Oliver Dowden, the Secretary of State for Digital, Culture, Media and Sport, then issued a public interest intervention notice (PIIN) in April, which confirmed he is intervening in the sale on national security grounds.

The CMA does not conduct its own security assessments, but passes on concerns from third parties. Its remit is to consider the implications of the deal on competition, and this will also be a factor in whether or not the deal will be allowed to go ahead.

According to Bloomberg News, which cited a person close to the government discussions, the assessment delivered by the CMA to Dowden contains worrying implications for national security and the UK government is currently inclined to reject the takeover. The sources also said no final decision has yet been made.

The matter now rests in Dowden’s hands. He could also decide to let the deal proceed with conditions attached for Nvidia, or he could request a more detailed (phase 2) probe by the CMA.

Nvidia told Reuters that it looks forward to the questions from the UK government and expects to resolve any issues they may have.

More chips please

As Telecoms.comhas already pointed out, it’s unclear how Arm’s change from Japanese to US ownership will affect UK national security. However, the attitude of governments would appear to have been influenced by the different climate regarding semiconductors in recent years, exacerbated by the current shortage of chips. Now any tech or telecoms M&A is subjected to an elevated level of scrutiny.

It remains to be seen whether national security or competition concerns can be overcome to allow this massive deal to go through. It still looks unlikely that this deal will be globally approved, with the green light required from China, the European Union, the UK, and the US.