UK government opens national security probe into Nvidia’s $54bn Arm deal
The UK government has launched a a full-blown national security investigation into Nvidia’s planned takeover of British chip designer Arm, introducing another obstacle in the way of the $54bn deal.
Digital and culture secretary Nadine Dorries has ordered a “phase 2” investigation into whether the deal operates against public interest, thus instructing the UK competition watchdog to carry out an in-depth inquiry into antitrust concerns and national security issues associated with the transaction.
“The secretary of state believes that the ubiquity of Arm technology makes the accessibility and reliability of Arm IP necessary for national security,” the government said in a letter published today.
Among the risks to national security cited in the letter, Dorries believes the deal could result in a lessening of competition that hampers innovation and diversity in the market; jeopardises the “secure development” of rival versions of its computer products; a “de-prioritisation” of security by competitors; threaten Arm’s governance; and hamper the UK’s ability to “develop, operate or support defence and security systems that utilise Arm IP.”
Dorries’ predecessor, Oliver Dowden, first ordered the CMA to prepare a report on whether the deal could be deemed anti-competitive in April, along with a summary of any national security concerns raised by third parties.
In its findings, delivered in July, the CMA said it had “serious competition concerns” over the California-based company’s acquisition of Arm, which it said could “stifle innovation across a number of markets”.
The watchdog also warned that the deal could give Nvidia the power to weaken rivals by cutting of their access to Arm’s technology.
A spokesperson for Nvidia told City PM: “We plan on addressing the CMA’s initial views on the impact of the transaction on competition, and we will continue to work with the UK government to resolve its concerns.
“The Phase 2 process will enable us to demonstrate that the transaction will help to accelerate Arm and boost competition and innovation, including in the UK.”
Although Dorries is mandated to accept the watchdog’s decision on competition, the decision surrounding national security concerns lies with the government.
The new probe will deliver a further blow to the US company, whose acquisition of Arm – Britain’s biggest technology company – from Japan’s SoftBank is already facing scrutiny by EU and Chinese regulators, too.
Arm’s currently powers the majority of the world’s computing devices, from smartphones to cars connected to the internet, and thus supplies the world’s biggest tech companies, such as Microsoft, Google and Apple.
Nvidia has argued that the buyout will benefit Arm’s finances and the industry as a whole and said it would maintain Arm as a neutral technology supplier, in an attempt to relieve concerns from its tech giant customers.