UK probes national security of $40bn Nvidia and Arm merger

UK government has asked the Competition and Markets Authority to do an even deeper dive into Nvidia’s £40bn takeover of Arm after initial findings unearthed negative implications for chip design choice. The competition watchdog in July reported on its findings on Phase One of the investigation in which it received “detailed and reasoned submissions from customers and competitors raising concerns in numerous markets.” The full report [PDF] was published today. The CMA said it encountered worries about the merged businesses’ “ability and incentive to harm the competitiveness of Nvidia’s rivals by restricting access to Arm’s CPU IP, and impairing interoperability between related products, so as to benefit Nvidia’s downstream activities and increase its profits.”

These are the exact same issues the industry has grappled with ever since Nvidia first made advances to Arm in September last year: Arm must remain the Switzerland of the chip industry. The restricted competition would be felt most in the data centre, IoT, automotive and gaming application sector. The Department of Culture, Media and Sport (DCMS) said today it was ordering Phase Two of the investigation on national and competition grounds. Digital Secretary Nadine Dorries has quasi-judicial power as part of the Enterprise Act 2002 to intervene in issues of public interest.

Further, it was deemed that national security is a factor in Phase Two. Dorries said: “Arm has a unique place in the global technology supply chain and we must make sure the implications of this transaction are fully considered. The CMA will now report to me on competition and national security grounds and provide advice on the next steps.”

UK government, she added, welcomes foreign investment “but it is right that we fully consider the implications of this transaction.” The CMA will have 24 weeks to undertake Phase 2 before delivering its report to DCMS. That report could clear the transaction, or, if competition or security issues are confirmed, kick off a remedies process that could take another 12-18 weeks.

A spokesperson at Nvidia told us: “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.” So the merger is going to be stuck in the pipeline for many more months.

Lest we forget, the EU is also showing a great interest in the purchase of Arm by Nvidia and expects to give its blessing or otherwise in early 2022. (R)

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