Nvidia-Arm agreement guarantees in-depth investigation of competition, according to British regulator

Nvidia’s $ 40 billion takeover by British chip designer Arm should be the subject of an in-depth investigation, the UK competition regulator said on Friday.

The Competition and Markets Authority says it has sent a summary of its initial findings on the proposed acquisition to British Digital Secretary of State Oliver Dowden.

In the report, the watchdog says it found “significant competition concerns” with the deal. The CMA is concerned that Nvidia may be hampering competition by restricting access to Arm’s intellectual property and “harming interoperability between related products.”

These strategies could lead to potential “substantial decrease in competition” in several markets, including the provision of data centers, car software and game consoles, the regulator said.

Nvidia has repeatedly insisted that it will not change Arm’s business model.

“We look forward to the opportunity to address the CMA’s initial views and resolve any questions the Government may have,” an Nvidia spokesman told CNBC. “We are confident that this transaction will be beneficial to Arm, its licensees, the competition and the UK.”

It comes after the British government intervened in the Nvidia-Arm agreement for national security reasons. Dowden had asked the CMA to prepare a report on the implications of buying Nvidia’s Arm.

The government said it was planned to make a decision on whether to conduct a second phase investigation at the time.

“We have received the first phase report from the CMA and the digital secretary will make a decision on whether to proceed to the next phase of the investigation in due course,” a government spokesman said.

Arm is a Cambridge, England based company specializing in semiconductor architecture designs. The firm’s chip plans are licensed for chip makers around the world. SoftBank sells it to Nvidia for $ 40 billion.

Major technology companies, such as Qualcomm, Microsoft and Google, have complained that the deal will hurt competition from the semiconductor industry.

This week, Nvidia admitted that the planned acquisition is unlikely to be completed within the 18-month period it had initially set.

The Prime Minister of the United Kingdom, Boris Johnson, is being pressured by lawmakers in his own party to intervene to prevent foreign companies from promising their own technology companies.

Nexperia, a Chinese company, recently agreed to acquire the largest chip manufacturing plant in the UK. Johnson later ordered Stephen Lovegrove, a national security adviser, to investigate the deal. A decision could be announced in the coming days.

– CNBC’s Sam Shead contributed to this report.