In September 2021 NVIDIA announced its intention to buy Arm in a deal valued at approximately $40 billion. Nvidia Corporation is a US technology company. Arm, which is headquartered in Cambridge, licenses semiconductor intellectual property and is a major player in the global semiconductor industry, with tens of billions of Arm-based chips used worldwide. The chips, based on Arm’s intellectual property, power smartphones and are contained in a considerable proportion of connected devices within homes, cars and businesses.
While not all individual devices relying on Arm-based chips are necessarily classed as ‘critical’ in themselves, according to the UK government, the security and resilience of the broader supply chain is important for UK national security.
Digital Secretary Nadine Dorries has now instructed the CMA to carry out an in-depth Phase Two investigation of the proposed acquisition of Arm by NVIDIA on competition and national security grounds.
The Digital Secretary has quasi-judicial powers under the Enterprise Act 2002 to intervene in certain mergers on public interest grounds. The decision follows the completion of the Phase One process during which the CMA conducted an initial investigation of the potential competition implications of the transaction.
The CMA found the transaction raises the possibility of a “substantial lessening of competition across four key markets”: data centres, Internet of Things, the automotive sector and gaming applications.
In addition, following the consideration of evidence gathered from across government, the Secretary of State also deems that the interest of national security continues to be relevant and should be subject to further investigation.
The CMA will now lead the Phase Two investigation covering both competition and national security. It will have 24 weeks (subject to a possible eight-week extension) to conduct this investigation and deliver a final report to the Digital Secretary.
The ability to intervene in transactions on the grounds of national security within the Enterprise Act 2002 is being replaced by the National Security and Investment Act when it comes into force from 4 January 2022.
Recently, we reported that the European Commission is also investigating the deal on competition grounds.
