Government Intervenes In ARM Sale To Nvidia, Citing National Security

The United Kingdom has reacted to ongoing concern about the sale of chip designer ARM Holdings to American GPU giant Nvidia.

The UK’s Digital Secretary, Oliver Dowden, on Monday issued a public interest intervention notice confirming that he was intervening in the proposed acquisition of ARM by Nvidia.

In September 2020, after months of rumours, it was confirmed that Cambridge-based ARM, whose designs power 95 percent of the world’s smartphones, was to be sold to Nvidia for a hefty $40 billion (£28.5bn).

Sale concerns

The acquisition was hugely controversial at the time, and opposed by one of ARM founders, Tudor Brown, as well as Hermann Hauser (involved in the development of the first ARM processor when it was part of Acorn).

Both said the company should not be sold to a semiconductor firm, but should remain a neutral supplier to the industry.

The sale came after SoftBank had acquired ARM for $32bn in 2016, which had also prompted political concern in the UK at the time, with politicians urging the government to step in to ensure that ARM remained headquartered in Cambridge.

In January 2021 the UK competition regulator, the Competition and Markets Authority (CMA), confirmed it would investigate Nvidia’s acquisition of ARM Holdings.

On top of that UK CMA probe, the European Commission and the US Federal Trade Commission (FTC) also launched their own probes into the matter.

China’s State Market Regulatory Administration is also reportedly investigating the proposed deal.

In February this year, it was reported that Nvidia’s proposed acquisition of ARM was also being opposed by tech giants such as Alphabet, Microsoft, and Qualcomm.

Google, Microsoft and Qualcomm all manufacturer their own inhouse processors, and depend upon ARM chip designs.

UK intervention

Now the UK government on Monday has also decided to intervene on national security grounds.

Digital Secretary Oliver Dowden “issued a Public Interest Intervention Notice (PIIN) in relation to the proposed sale of ARM to Nvidia.”

He has written to the Competition and Markets Authority (CMA) to inform them of his decision and has instructed them to begin a ‘phase one’ investigation to assess the transaction.

“The CMA will now prepare a report with advice on jurisdictional and competition issues,” the government announced.

“The report will also include a summary of any representations it receives on potential national security issues arising from a consultation it will launch to gather third-party views,” the government stated. “Alongside the CMA’s process, the government will examine the national security public interests.”

The UK government has the power to pull the plug on the deal, as the Digital Secretary has ‘quasi-judicial’ powers under the Enterprise Act 2002 to intervene in certain mergers on public interest grounds.

National security

“Following careful consideration of the proposed takeover of ARM, I have today issued an intervention notice on national security grounds,” explained Digital Secretary Oliver Dowden.

“As a next step and to help me gather the relevant information, the UK’s independent competition authority will now prepare a report on the implications of the transaction, which will help inform any further decisions,” said Dowden.

“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 Dowden.

The CMA has until midnight at the end of 30 July 2021 to complete and submit this report to the Digital Secretary.

Critics of the national security argument will point out that ARM is already owned by a Japanese firm (Softbank) and any national security concerns should have been examined back in 2016 when ARM was initially sold.

Nvidia of course is an American firm – a country that is one of the UK’s closet allies.