UK intervenes in $40bn Nvidia-Arm deal on national security grounds

LaToya Harding
·3 min read

WATCH: UK intervenes in Nvidia's $40bn ARM takeover

The UK government has stepped in on Nvidia Corporation’s (NVDA) $40bn (£28bn) acquisition of British technology company Arm due to concerns surrounding security.

Digital secretary Oliver Dowden has issued a public interest intervention notice (PIIN) confirming that he is intervening in the proposed acquisition from Japanese investment fund SoftBank (SFTBF), which bought it back in 2016 for $31.4bn.

Dowden has “quasi-judicial” powers under the Enterprise Act 2002 to intervene in certain mergers on public interest grounds. The move will ensure that any national security implications for the UK are explored.

He has written to the Competition and Markets Authority (CMA) to inform them of his decision, and has instructed them to begin a ‘phase one’ investigation to assess the transaction.

Stock dropped on Monday. Chart: Yahoo Finance UK
Stock dropped on Monday. Chart: Yahoo Finance UK

The CMA will now prepare a report with advice on jurisdictional and competition issues. The report will also include a summary of any representations it receives on potential national security issues arising from a consultation it will launch to gather third-party views.

Alongside the CMA’s process, the government will examine the national security public interests.

The ‘phase one’ investigation will ensure specific considerations around competition, jurisdiction and national security are assessed.

It will advise whether the acquisition of the chip designer results in a substantial lessening 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.

READ MORE: Boris Johnson urged to intervene on Nvidia's $40bn ARM takeover

“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,” Dowden said.

The CMA has until midnight at the end of 30 July 2021 to complete and submit this report to the digital secretary.

Cambridge-based ARM is a major global player in the semiconductor industry. Arm's technology is at the heart of most smartphones and smart devices worldwide - it licenses its tech to the likes of Apple (AAPL), Samsung (005930.KS) and Huawei.

Jensen Huang, CEO of Nvidia, shows the NVIDIA Volta GPU computing platform at his keynote address at CES in Las Vegas, Nevada, U.S. January 7, 2018. REUTERS/Rick Wilking
Jensen Huang, CEO of Nvidia, shows the NVIDIA Volta GPU computing platform at his keynote address at CES in Las Vegas, Nevada, U.S. January 7, 2018. REUTERS/Rick Wilking

Semiconductors are fundamental to current and future technologies – from artificial intelligence and quantum computing to 5G. Semiconductors also underpin the UK’s critical national infrastructure and are found in defence and national security related technologies.

In September last year Nvidia announced its intention to buy the firm. The acquisition is one of the largest ever in the technology sector and the biggest on record of a British tech company.

However, it has already faced a number of challenges. The CMA and America’s Federal Trade Commission (FTC) have already opened investigations, while authorities in Europe and China are also expected to scrutinise the deal.

In January, the CMA said it was investigating the deal amid concerns it could lead Arm to withdraw, increase its prices or reduce the quality of its services to Nvidia’s competitors.

Google (GOOG), Microsoft (MSFT) and Qualcomm (QCOM) have also raised concerns about the deal.

A spokesperson for Nvidia said: "We do not believe that this transaction poses any material national security issues.

"We will continue to work closely with the British authorities, as we have done since the announcement of this deal."

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