UK to take a closer look at proposed Nvidia acquisition of Arm

Just four months after the US decided the giant semiconductor consolidation proposed by Nvidia needed closer inspection, the UK has agreed.

It comes in the form of a letter from Digital Secretary Oliver Dowden writing to the Competition and Markets Authority to tell them to begin a phase one investigation. Last December the US Federal Trade Commission decided to take a deeper dive into the acquisition by a US company (Nvidia) of a UK-based company (ARM) owned by a Japanese one (Softbank).

Dowden’s biggest concern seems to have little directly to do with competition, however, with the main focus being on national security concerns. How they might be substantially different to when Softbank was allowed to buy Arm five years ago is unclear, but you have to wonder if the CMA is the best agency to charge with a national security audit.

“Following careful consideration of the proposed takeover of ARM, I have today issued an intervention notice on national security grounds,” said Dowden. “As a next step and to help me gather the relevant information, the UK’s independent competition authority will now prepare a report on the implications of the transaction, which will help inform any further decisions.”

An intervention? That makes it sound like Arm has gone off the rails or something. This decision would appear to have been influenced by the markedly different climate regarding semiconductors in recent years, exacerbated by the current drought. Now any tech or telecoms M&A is subjected to an elevated level of scrutiny.

Thankfully the CMA will also be allowed to perform its core function, because there are distinct competition concerns to be addressed. One of the main reasons the previous acquisition was waved through was because Softbank isn’t a chip company. Nvidia is, of course, and if it owned Arm it would be in a position to deny competitors access to Arm’s designs, or at the very least give itself a head start.

So the resulting report will look at both matters and make recommendations accordingly. A sensible outcome would be for it to conclude there are no special national security concerns, but plenty of competition ones, which would result in a full CMA investigation. It still looks unlikely that this deal will be globally approved.