UK raises competition concerns on chip designer mega-takeover

Regulator antitrust unease rears its head in another mega tech firm buyover.
20 August 2021

The blockbuster buyout of British chipmaker Arm by graphics card kingpin NVIDIA has hit a regulatory snag due to anti-competition and security concerns. (Photo by Sam YEH / AFP)

The UK has decided that a planned takeover of Britain-based chip designer Arm by US firm Nvidia raises “serious competition concerns”, while the deal may still be probed on national security grounds.

Japan’s SoftBank Group revealed almost a year ago that it was selling Britain-based Arm for up to US$40 billion (approximately 34 billion euros) in a deal it hoped to complete in early 2022 following competition reviews in several jurisdictions.

Following its own investigation, Britain’s Competition and Markets Authority (CMA) highlighted concerns that included possible price rises to semiconductors, already facing a global shortage because of the pandemic and impacting in particular the auto sector.

“We’re concerned that Nvidia controlling Arm could create real problems for Nvidia’s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets,” CMA Chief Executive Andrea Coscelli said in a statement. He noted that the chip technology industry was “vital” to everyday products.

The CMA said it had reported its takeover concerns to the UK government department charged with digital industry matters and arguing that “an in-depth investigation into the deal[…] is warranted on competition grounds”. The watchdog meanwhile confirmed that the takeover could still face an in-depth UK probe on national security grounds.

“The chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day,” Coscelli said. “This includes the critical data processing and data center technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars.”

The anti-competition regulatory disquiet comes as the UK this week ordered an investigation into the takeover of UK defense technology firm Ultra Electronics by US-owned Cobham in order to assess risks to security.

‘Beneficial’ deal for chip designer

In a statement on Friday, Nvidia said it looked forward to the opportunity to address “the CMA’s initial views and resolve any concerns the government may have”, adding it remained confident the deal “will be beneficial to Arm, its licensees, competition, and the UK”.

Founded in 1990, Arm specializes in microprocessors and dominates the global smartphone market. But its chips are also found in sensors, smart devices, and cloud services. Nvidia, known for graphics cards favored in the video game industry, has seen sales skyrocket during the coronavirus crisis, with gaming a popular pastime in lockdown.

SoftBank bought Arm in 2016 for US$32 billion.