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Nvidia’s takeover of Arm in doubt after calling for an inquiry Takeover could stifle competition.


The Competition and Markets Authority is concerned that the takeover could harm innovation and lead to higher prices for consumers


The proposed $40 billion takeovers of Arm, the British microchip designer, is in doubt after the regulator found the deal raised serious competition concerns.

The Competition & Markets Authority has recommended that an in-depth investigation be launched into the takeover by Nvidia, the US technology giant, raising renewed uncertainty over whether it will go ahead.


The regulator warned in a preliminary report on the deal published yesterday that the acquisition would give the enlarged business incentive to harm the competitiveness of its rivals by restricting access to Arm’s intellectual property, which is used by companies that produce semiconductor chips in competition with Nvidia.


“Ultimately, the CMA is concerned this loss of competition could stifle innovation across a number of markets, including data centers, gaming, the ‘internet of things and self-driving cars,” it found. “This could result in more expensive or lower-quality products for businesses and consumers.”


Nvidia agreed to buy Arm from SoftBank, the Japanese technology conglomerate, last September and had hoped to complete the deal by next March. However, it said on Wednesday that it would now take longer.


Nvidia agreed to buy Arm from Softbank, the Japanese technology conglomerate, in September and had hoped to complete the deal by March next year. However, it said on Wednesday that it would now take longer.


The proposed takeover has met resistance from some Arm customers, who fear that its new owner could raise prices, and is being investigated by antitrust watchdogs worldwide.

Arm was founded in 1990 as a joint venture between Acorn and Apple and employs about 7,000 people, of which 3,000 are in the UK. The Cambridge-based company was sold in 2016 to SoftBank, which offered a series of legally binding assurances to maintain Arm’s headquarters, double its UK-based staff over the following five years and increase its overseas headcount.


Arm is considered the most successful technology to have emerged from the UK in recent decades. Its designs power almost every smartphone and the company is a major player in the semiconductors industry, which underpins critical infrastructure and is vital to products used daily by businesses and consumers, such as data processing and datacentres. The industry is also important to the development of AI technology, which will drive growth industries such as robotics and self-driving cars.

Andrea Coscelli, chief executive of the CMA, said it was concerned that the deal could create problems for Nvidia’s rivals by “limiting their access to key technologies and ultimately stifling innovation across a number of important and growing markets. This could end up with consumers missing out on new products, or prices going up.”

The potential phase 2 inquiry by the CMA comes amid a record number of takeover bids of companies in Britain from private equity and competitors.


Kwasi Kwarteng, the business secretary, this week instructed the CMA to investigate the £2.6 billion takeovers of Ultra Electronics, the Royal Navy supplier, by the US private equity firm Advent International, to assess any national security concerns.

The takeover of Arm also raises potential security concerns because semiconductors underpin technologies used by the armed forces.


Oliver Dowden, the culture secretary, had intervened in April to ask the CMA to gather third-party views on the national security implications, alongside the authority’s initial review on competition grounds.


He will now decide whether the merger should be referred for an in-depth Phase 2 investigation on both competition and national security grounds, or if it should be passed back to the CMA to investigate on competition grounds only.

Nvidia had offered an undisclosed “behavioral remedy”, which would have involved officials regulating its future behavior, but the CMA decided that this did not alleviate its concerns.


A spokesman for Nvidia, whose shares were trading up $4.40, or 2.2 percent, at $202.40 in New York, said it remained confident that the takeover was “beneficial to Arm, its licensees, competition, and the UK”, adding: “We look forward to the opportunity to address the CMA’s initial views and resolve any concerns the government may have.”


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