Nvidia’s $ 40 billion ARM deal likely should be given a closer look

LONDON, Aug. 20 (Reuters) – Nvidia Corp’s (NVDA.O) planned $ 40 billion acquisition of UK chip designer ARM is set to be the subject of a lengthy investigation after a UK regulator discovered that the purchase by the American group could harm competition and weaken its rivals.

Signed in September last year, the deal for Britain’s largest tech company by the world’s largest graphics chip and AI maker was hit by a swift backlash from politicians, rivals and customers .

In Britain it has also become politically charged, with critics claiming that a rise in economic nationalism and a greater awareness of the importance of infrastructure ownership means that ARM, owned by Japanese firm SoftBank since 2016, should no longer be sold.

The deal will be assessed by regulators around the world and on Friday the UK Competition and Market Authority (CMA) said it could lead to “significant competition concerns”.

While Nvidia had offered solutions to mitigate the impact, the CMA did not believe they would alleviate its concerns.

“The CMA considered that the merger should be turned into a Phase 2 in-depth investigation on competitive grounds,” he said.

Britain has seen a record number of take-over bids this year, with private equity firms and listed companies rushing to everything from supermarkets to beverage makers and advocacy groups.

ARM is a major player in global semiconductors, a fundamental industry for technologies ranging from artificial intelligence and quantum computing to 5G telecommunications networks. Its designs power almost every smartphone and millions of other devices.

Semiconductors also underpin critical infrastructure in Britain and the government has said they are in the realm of technology related to defense and national security issues.

The deal has sparked anger in the semiconductor industry, where Arm has long been a neutral player awarding key intellectual property rights to customers who are otherwise intense rivals, including Qualcomm Inc (QCOM.O) , Samsung Electronics Co Ltd (005930.KS) and Apple Inc. (AAPL.O).

The fear of chipmakers is that Nvidia is giving itself early access to Arm’s innovations rather than distributing them across the industry on an equal footing. Read more

The CMA said it was concerned that the merged company would have the ability and incentive to undermine the competitiveness of Nvidia’s competitors by restricting access to Arm’s intellectual property.

The government will give its fuller response at a later date, which will also include its reflection on any impact on national security. He could send the case back for a full, thorough investigation which takes around 24 weeks.

The British government could then block the takeover, approve it or let it go with certain commitments.

Reporting by Kate Holton Editing by William Schomberg and Elaine Hardcastle

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