Struck in September last year, the deal for Britain's most
important technology company by the world's biggest maker of graphics and AI
chips sparked a swift backlash from politicians, rivals and customers.
In Britain, it has also become politically charged, with
critics arguing that a rise in economic nationalism and greater awareness of
the need to own key infrastructure means ARM, owned by Japan's SoftBank since
2016, should not be sold again.
On Friday, Britain's competition regulator added to the
pressure, saying the merged entity could reduce competition in markets around
the world and in sectors as large as data centres, the internet-of-things,
automotives and gaming.
To pass a deal with serious competition implications, the
regulator would normally require disposal of the part of the merged business
that has the power to harm rivals. But the concerns around ARM and Nvidia span
the whole business.
The deal also raised alarm because it poses a threat to
innovation in industries that form the backbone of modern economies.
"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," said Andrea Coscelli, head of Competition and
Markets Authority.
Powerful Combination
ARM is a major player in global semiconductors, a sector
fundamental to technologies from artificial intelligence and quantum computing
to 5G telecoms networks. Its designs power nearly every smartphone and millions
of other devices.
Semiconductors also underpin critical infrastructure in
Britain and the government has said they are in technology related to defense
and national security matters.
The deal also sparked anger in the semiconductor industry,
where Arm has long been a neutral player licensing key intellectual property to
customers who are otherwise intense rivals, including Qualcomm, Samsung
Electronics, and Apple.
The fear among chip firms is that Nvidia will give itself
early access to Arm's innovations rather than distributing them to the entire
industry on an equal basis.
While Nvidia had offered remedies to lessen the impact, the
UK regulator did not believe they would alleviate its concerns.
Nvidia, which had hoped to wrap up the deal by March next
year, said on Wednesday it was taking longer to win the necessary approvals
than expected and some US based analysts have said they believe the takeover
will be blocked. The deadline for the deal is September next year.
Nvidia said on Friday it believed the deal remained
beneficial to the industry and ARM's CEO has said the proposed merger would
better support the creation of jobs and enable it to invest in the technologies
of the future, as opposed to it becoming a standalone public company.
The sale of ARM last year came as SoftBank sold a string of
other assets to reduce its debt.
The UK government will now consider the findings and give a
fuller response at a later date, which will also include its thinking on any
impact on national security. A full in-depth inquiry takes around six months.
Britain's government could then block the takeover, approve
it or allow it to pass with certain undertakings.
Britain has seen a record number of takeover bids this year,
with private equity and listed firms pouncing on everything from supermarkets
to pharmaceutical groups and even the maker of its torpedoes and submarine
sensors.