UK intervenes in Nvidia-ARM deal on national security grounds
Nvidia’s share price dropped a few percent on the news of the intervention, which has been invoked to give the UK Competition and Markets Authority (CMA) time to report on multiple issues including jurisdictional, competition and national security issues.
The CMA had already announced an investigation of the deal back in January 2021, but that was based on competition considerations alone (see UK authorities launch probe into Nvidia-ARM deal). The government’s invocation includes that but adds the aspect of national security considerations.
The next process starts with a repeated first look at the circumstances and implications of a merger and will include third-party views – which in the case of Nvidia-ARM have been consistently opposed to the deal. The CMA has until July 30, 2020, to return its phase one report at which point the politicians have a choice to either allow the transaction or invoke a more rigorous phase two investigation.
The UK’s department of digital, culture, media and sport, which announced the intervention, made the observation that Cambridge-based ARM is a global player in the semiconductor industry and that semiconductors are fundamental to future technologies and the UK’s critical national infrastructure and in defence and national security.
However, the deal could still be allowed to proceed if the government accepts Nvidia mitigation undertakings and assurances that it will not relocate ARM or reduce investment in UK.
“We want to support our thriving UK tech industry and welcome foreign investment, but it is appropriate that we properly consider the national security implications of a transaction like this,” said Digital Secretary Oliver Dowden, in a statement.
Google, Microsoft and Qualcomm have been reported to be against the deal and it is thought that many other licensees of ARM technology are concerned by the prospect of Nvidia ownership of the current source of intellectual property they build chips around (see Google, Microsoft, Qualcomm object to Nvidia-ARM deal).
There is no time limit on any phase two investigation but Jensen Huang, CEO of Nvidia, has consistently expressed confidence that the merger deal can be ushered past all public authority scrutiny within 18 months.
The deal will also face investigation from the key regional market authorities: Europe, the US and China.
Speaking at the Nvidia operated Graphics Technology Conference Huang said: “The regulators will see the wisdom of it, and our discussions with them are as expected and constructive. I’m confident that we’ll still get the deal done in 2022, which is when we expected it in the first place, about 18 months.”
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