UK Government Orders Phase Two Review into Nvidia-Arm Deal

The UK government has ordered a phase two investigation into Nvidia’s proposed acquisition of chip designer Arm, citing competition and national security concerns.

The move follows the end of a phase one review into the £40m deal by the Competitions and Markets Authority (CMA) in August, which raised significant competition concerns but did not refer to national security. The report, published in full today, cited “detailed and reasoned submissions from customers and competitors raising concerns” across the globe. This related to the potential of a “substantial lessening of competition across four key markets” – data centers, internet of things, the automotive sector and gaming applications.

Digital Secretary Nadine Dorries has now written to the CMA instructing them to conduct an in-depth phase two investigation into the deal. In addition to competition considerations, Dorries said national security continues to be a relevant consideration and should be investigated further.

Under the Enterprise Act 2002, the UK government has the power to intervene in certain mergers on public interest grounds. The issue in the Nvidia-Arms deal relates to the design and production of semiconductors, which is increasingly seen as strategically critical to countries’ national and financial security. Cambridge-based Arm licenses semiconductor intellectual property, and Arm-based chips are used in a significant proportion of connected devices within homes, cars and businesses, including the vast majority of smartphones.

Dorries commented: “I have carefully considered the CMA’s phase one report into NVIDIA’s proposed takeover of Arm and have decided to ask them to undertake a further in-depth phase two investigation.

“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.

“The government’s commitment to our thriving tech sector is unwavering and we welcome foreign investment, but it is right that we fully consider the implications of this transaction.” 

The CMA now has 24 weeks to conduct the phase two investigation and deliver a final report to the Digital Secretary. Once this process is complete, she has two options. The first is to make an adverse public interest finding in relation to the acquisition on national security and/or competition grounds, and if so, take action to remedy any adverse effects. The other would be to make no adverse public interest finding and refer the case back to the CMA to remedy any competition concerns identified.