Nvidia Corp’s planned $ 40 billion acquisition of UK chip designer ARM hit a major hurdle on Friday after a UK regulator discovered it could hurt competition and weaken rivals, and required further investigation. long.
Signed in September last year, the deal for Britain’s biggest tech company by the world’s largest graphics chip and AI maker sparked a swift reaction from politicians, rivals and customers.
In Britain it has also become politically charged, with critics claiming that a rise in economic nationalism and a greater awareness of the need to own key infrastructure means that ARM, owned by Japanese firm SoftBank since 2016 , should no longer be sold.
Britain’s competition regulator added to the pressure on Friday, saying the merged entity could reduce competition in markets around the world and in industries as important as data centers, the Internet of Things, the automobile and games.
To reach an agreement with serious implications for competition, the regulator would normally require the divestiture of the part of the merged company that has the power to harm its competitors. But concerns about ARM and Nvidia are company-wide.
The deal has also sounded the alarm as it poses a threat to innovation in industries that form the backbone of modern economies.
“We are concerned that Nvidia controlling ARM could create real problems for Nvidia’s competitors by limiting their access to key technologies and ultimately stifling innovation in a number of important and growing markets,” said Andrea Coscelli, head of the Competition and Markets Authority.
ARM is a major player in global semiconductors, a fundamental industry for technologies ranging from artificial intelligence and quantum computing to 5G telecommunications networks. Its designs power almost every smartphone and millions of other devices.
Semiconductors also underpin critical infrastructure in Britain and the government has said they are in the realm of technology related to defense and national security issues.
The deal has also sparked anger in the semiconductor industry, where Arm has long been a neutral player awarding key intellectual property rights to customers who are otherwise intense rivals including Qualcomm Inc, Samsung Electronics Co Ltd and Apple Inc.
The fear of chipmakers is that Nvidia is giving itself early access to Arm’s innovations rather than distributing them across the industry on an equal footing.
While Nvidia had offered solutions to mitigate the impact, the British regulator did not believe they would alleviate its concerns.
Nvidia, which hoped to complete the deal by March of next year, said on Wednesday it was taking longer than expected to get the necessary approvals and some US-based analysts said they believed that the takeover would be blocked. The deadline for the deal is September of next year.
Nvidia said on Friday it believed the deal remained beneficial to the industry and the CEO of ARM said the proposed merger would better support job creation and allow it to invest in the technologies of the future, at the same time. instead of becoming an autonomous public enterprise.
ARM’s sale last year came as SoftBank sold a series of other assets to reduce its debt.
The UK government will now review the findings and give a more comprehensive response at a later date, which will also include its reflection on any impact on national security. A full and thorough investigation takes about six months.
The British government could then block the takeover, approve it or let it go with certain commitments.
Britain has seen a record number of take-over bids this year, with private equity firms and listed companies rushing to everything from supermarkets to pharmaceutical groups and even the maker of its torpedoes and sensors under -marines.
Reporting by Kate Holton, additional reporting by Stephen Nellis in San Francisco; Editing by William Schomberg and Elaine Hardcastle