LONDON: The United Kingdom is considering blocking a takeover of Arm Ltd by Nvidia Corp due to potential risks to national security, according to people familiar with the discussions.
Nvidia, the biggest United States chip company by market capitalisation, announced in September a US$40bil (RM169.02bil) deal to acquire Arm from Japan’s SoftBank Group Corp, as part of a push to spread its reach in the surging market for semiconductors.
SoftBank has been selling assets to raise cash for buybacks and fresh investments in startups.
In April, UK Culture Secretary Oliver Dowden asked the Competition and Markets Authority (CMA) to prepare a report on whether the deal could be deemed anti-competitive, along with a summary of any national security concerns raised by third parties.
The assessment, delivered in late July, contained worrying implications for national security and the UK is currently inclined to reject the takeover, a person familiar with government discussions said. The UK is likely to conduct a deeper review into the merger due to national security issues, a separate person said.
No final decision has been taken, and the UK could still approve the deal alongside certain conditions, the people added. Dowden is set to decide on whether the merger needs further examination by the UK’s competition authorities.
“We continue to work through the regulatory process with the UK government,” said an Nvidia spokesperson in a statement. “We look forward to their questions and expect to resolve any issues they may have.” Shares in Nvidia were little changed on Tuesday, while SoftBank fell 1.5% in Tokyo yesterday.
“If regulators do block the deal, it will impede Nvidia’s ability to dominate the computing-chip market, but we believe investors already had low expectations that the deal would be completed,” said Anand Srinivasan, BI senior semiconductors industry analyst.
A spokesperson for the CMA declined to comment. A UK official declined to comment.
Arm owns the most widely-used set of standards and designs in the US$400bil (RM1.69 trillion) chip industry.
Its technology is at the heart of most of the world’s smartphones and is finding an increasing role in computing, including in server machinery that runs corporate and government systems.
The Cambridge-based company has acted as a neutral party which sells chip blueprints and licenses its standards to a wide range of major technology companies, many of whom are fierce competitors.
Ownership by Japan’s SoftBank, which acquired it in 2016 and which doesn’t overlap with Arm’s customers, has preserved that neutrality. It is unclear how ARM’s change from Japanese to American ownership will affect UK national security. However, since SoftBank’s acquisition, the semiconductor technology has become a focus for politicians.
The chip industry became a central part of former president Donald Trump’s trade war with China and the US has taken action to restrict that country’s access to know-how that’s primarily owned by the US companies that dominate the industry.
US government restrictions on the sale of chip technology to China already govern some of Arm’s inventions, as the company has operations there.
Newport Wafer Fab Ltd, based in Wales, is currently under review from the UK government after it agreed to be sold to a Chinese manufacturer for around ￡63mil (US$87mil or RM367.6mil).
Prime minister Boris Johnson has moved to protect critical national infrastructure including barring Chinese-owned Huawei Technologies Co and he is also planning to press ahead with a flagship nuclear project without Chinese funding, according to a person familiar with the matter.
Arm’s position at the heart of the chipmaking industry means the deal has already raised concerns, because Nvidia directly competes with Arm’s customers like Qualcomm Inc, Intel Corp and Advanced Micro Devices Inc. Others have publicly endorsed the change of ownership. ― Bloomberg