Nvidia Arm deal: UK probes “national security” of sale to US company

By Robert Scammell

The UK government has launched a probe into Nvidia’s planned $40bn purchase of microchip designer Arm on “national security grounds”. Arm is currently owned by Japan’s Softbank.

Digital Minister Oliver Dowden said the Competition and Markets Authority (CMA) would compile a report by 30 July 2021 which could then inform further action.

Dowden used a public interest intervention notice, or PIIN, to launch the probe. The framework gives him the power to order an investigation into companies that report more than £1m in annual revenue where there may be a public interest concern.

The secretary of state did not explain the specific national security concerns in selling the Cambridge, UK, headquartered company to US-headquartered Nvidia.

Founded in 1990, Arm designs processors used in many of the world’s smartphones, computers and data centres. Nvidia’s main business has been graphics processing units for the gaming industry, automotive and enterprise solutions, but it also produces processors and systems-on-chips, often using Arm designs.

“Following careful consideration of the proposed takeover of Arm, I have today issued an intervention notice on national security grounds,” Dowden said in a statement. “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. The phase one investigation will ensure specific considerations around competition, jurisdiction and national security are assessed.”

A spokesperson for Nvidia said: “Regulatory review is confidential. The UK government regularly reviews national security issues and a public interest intervention is a step in this process. We remain in ongoing contact with the government.”

An Arm spokesperson referred Verdict to Nvidia’s statement.

The national security intervention is the latest blow to the deal, which was first announced in September last year. It currently faces regulatory scrutiny in multiple countries, including the US and China.

The UK Competition and Markets Authority (CMA) launched a separate probe into the deal in January to establish whether it will reduce competition in the semiconductor industry. Arm customers including Qualcomm and Apple have raised concerns that the takeover will create a conflict of interest as they compete for sales with Nvidia in other areas.

Japanese conglomerate Softbank acquired Arm in 2016 for $31.4bn but that deal did not receive the same level of scrutiny as the Nvidia takeover. At the time, then Chancellor Philip Hammond hailed the SoftBank deal as a sign that “Britain is open for business” following the EU referendum result.

However, many in the UK tech industry voiced concerns at the time that one of the country’s most successful technology companies was being sold to a Japanese buyer.

Michael Orme, consultant in GlobalData’s thematic research division, told Verdict that “it is becoming more likely daily that SoftBank will have to fall back on its last resort of floating Arm on the stock exchange.”

He added that it was “hard to see what national security issues are at stake” in the UK probe.

Last week Nvidia CEO Jensen Huang said he was “very confident that the regulators will see the wisdom of the transaction”.

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