Nvidia’s acquisition of British Arm under threat of government ban

Nvidia’s largest deal to acquire British tech company Arm for $ 40 billion could be blocked by UK authorities. An investigation into the potential consequences of the deal has begun, and the issue of national security has also been raised.

Shares of Nvidia (NVDA), which are up more than 110% in the past 12 months and 17.7% since the beginning of the year, fell 3.46% on Monday as the UK Department began investigating the consequences of its deal with the UK’s largest technology company Arm Holdings. …

What is Nvidia’s Arm Deal

Nvidia struck a deal with Arm last September through Japanese investment bank SoftBank, which currently owns Arm. Nvidia expected to close the deal in 18 months after receiving all the necessary permits.

Nvidia’s deal with Arm has raised high concerns from the tech industry and regulators, as if merged, Nvidia gains tremendous weight and influence in the industry.

The American company Nvidia is engaged in the production of software and a number of processors: both graphics and central ones, for mobile and other devices, as well as for cars, data centers, and even specialized for use by cryptocurrency miners.

Arm technologies are used in more than 95% of smartphones in the world and a variety of other technologies. Arm licenses these technologies, while the company does not manufacture the chips themselves.

Concerned about potential monopoly threats and “conflicts of interest” as a result of this deal, executives from Google (GOOGL), Qualcomm (QCOM), Microsoft (MSFT) have filed applications with US regulators to ban it.

Nvidia’s position

Nvidia’s management, which has high expectations for the future prospects of the deal, said the terms of the deal assume Arm will continue to use its open licensing model, “while maintaining global customer neutrality that has been the foundation of its success.”

Nvidia also indicated that Arm’s headquarters will remain in Cambridge, where Nvidia will build a world-class artificial intelligence (AI) research center, as well as a state-of-the-art AI supercomputer powered by Arm processors.

UK position

Oliver Dowden, UK digital secretary for the Department of Digital Culture, Media and Sports, said Monday that the Nvidia-Arm deal raises concerns about UK national security and authorities will begin investigating the potential consequences.

An Nvidia spokesman said: “We do not believe this deal poses any significant national security concerns. We will continue to work closely with the British authorities, as we have done since the announcement of this deal. ”

Market experts point out that the world’s largest countries are seeking to tighten their control over the technology industry in general and the semiconductor industry in particular, as they become more important to economies.

Most of the world’s semiconductor production comes from Asia, South Korea, Taiwan, Japan and China, and the United States has lost a significant share of the manufacturing market as American tech companies outsourced and used cheaper manufacturing services in Asia.

However, the pandemics and global semiconductor shortages have created a problem of chip shortages for technology companies around the world, including Europe, and brought to the surface the problems of dependence on monopolies and supplies from other countries.

In the US, Joe Biden plans to commit $ 50 billion to the semiconductor industry in the coming years. China is stepping up efforts to develop its semiconductor sector, and the EU is spending part of the $ 150 billion package to double its share of the global chip market by 2030.

A shortage of microcircuits has forced automakers around the world to temporarily close factories and cut production. In addition, chips are needed for the entire technology sector, the creation of 5G mobile networks, as well as the government and military sectors.

By opening an investigation into the implications of the Nvidia-Arm deal, the UK will determine whether it is in the country’s “public interest” based on national interests and national security fundamentals.

According to the statements of the British authorities, the results of the investigation should be presented by July 30.

Christine Phillips, a lawyer at London-based Fieldfisher, noted that the UK authorities are inconsistent and that they may need to pass new legislation and create their own version of the Washington Committee on Foreign Investment in the United States (CFIUS).

The lawyer pointed out that the UK government did not conduct a national security investigation when Japanese SoftBank bought Arm for $ 32 billion in 2016. What has changed in the five years since then is concerns about geopolitical risks.

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