Nvidia’s $40 bln deal for ARM likely set for lengthy review

  • Regulator finds competition problems in deal
  • Says a full investigation is needed

LONDON, Aug 20 (Reuters) – Nvidia Corps (NVDA.O) The proposed $ 40 billion acquisition of British chip designer ARM is facing a lengthy investigation after a British regulator found that the US corporation’s acquisition could affect competition and weaken rivals.

The deal struck in September last year for Britain’s premier technology company and the world’s largest manufacturer of graphics and AI chips was quickly hit by politicians, rivals and customers.

In the UK, it has also been politically charged, with critics arguing that increasing economic nationalism and awareness of the importance of infrastructure ownership mean ARM, which has been owned by Japan’s SoftBank since 2016, should no longer be sold.

The deal is being assessed by regulators around the world and on Friday the UK’s Competition and Markets Authority (CMA) determined that it could lead to “significant competition concerns”.

While Nvidia had offered remedial measures to mitigate the effects, the CMA didn’t think they would address their concerns.

“The CMA determined that the merger should be transferred to an in-depth phase 2 investigation for competitive reasons,” it said.

The UK has seen a record number of takeover bids this year, with private equity and publicly traded companies dropping on everything from supermarkets to beverage manufacturers to defense groups.

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

Semiconductors also underpin the UK’s critical infrastructure, and the government has said they are in the technology related to defense and national security matters.

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

The fear of the chip companies is that Nvidia will gain access to Arm’s innovations at an early stage instead of distributing them equally to the entire industry. Continue reading

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

The government will provide its more detailed answer at a later date, which will also include its reflections on possible national security implications. It could refer the deal for a thorough investigation that takes about 24 weeks.

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

Reporting by Kate Holton Editing by William Schomberg and Elaine Hardcastle

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