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

Regulator finds competition issues with deal
Says full investigation is needed

LONDON, Aug 20 (Reuters) – Nvidia Corp’s (NVDA.O) planned $40 billion acquisition of British chip designer ARM looks set to face a lengthy inquiry after a UK regulator found the purchase by the U.S. group could hit competition and weaken rivals.

Struck in September last year, the deal for Britain’s most important technology company by the world’s biggest maker of graphics and AI chips has been hit by a swift backlash from politicians, rivals and customers.

In Britain, it has also become politically charged, with critics arguing that a rise in economic nationalism and greater awareness of the importance of infrastructure ownership means ARM, owned by Japan’s SoftBank since 2016, should not be sold again.

The deal will be assessed by regulators around the world and on Friday, Britain’s Competition and Market’s Authority (CMA) found that it could lead to “significant competition concerns”.

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

“The CMA found that the merger should be progressed to an in-depth Phase 2 investigation on competition grounds,” it said.

Britain has seen a record number of takeover bids this year, with private equity and listed firms pouncing on everything from supermarkets to drinks makers and defence groups.

ARM is a major player in global semiconductors, a sector fundamental to technologies from artificial intelligence and quantum computing to 5G telecoms networks. Its designs power nearly every smartphone and millions of other devices.

Semiconductors also underpin critical infrastructure in Britain and the government has said they are in technology related to defence and national security matters.

The deal sparked anger in the semiconductor industry, where Arm has long been a neutral player licensing key intellectual property 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 among chip firms is that Nvidia will give itself early access to Arm’s innovations rather than distributing them to the entire industry on an equal basis. read more

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

The government will give its fuller response at a later date, which will also include its thinking on any impact on national security. It could refer the deal for a full in-depth inquiry which takes around 24 weeks.

Britain’s government could then block the takeover, approve it or allow it to pass with certain undertakings.

Reporting by Kate Holton
Editing by William Schomberg and Elaine Hardcastle

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