UK government launches investigation into Nvidia’s $40bn takeover of iPhone chip maker Arm

UK ministers are investigating a $40bn takeover of Cambridge-based chip maker Arm by American tech company Nvidia to determine whether the government should intervene.

Nvidia confirmed in the early hours of Monday morning that it intended to swoop for Arm, but the government later announced it would look into the deal, which critics say could damage the UK technology sector. 

Under UK law, ministers can intervene to block mergers and acquisitions on grounds including national security.

Arm designs the chips found inside billions of smartphones, including Apple's iPhones and a host of Samsung models. Its technology can also be found in laptops and other devices. 

As part of the proposed deal, Nvidia promised to keep Arm's headquarters in Cambridge.

Prime minister Boris Johnson’s official spokesperson said: “We recognise the vital role Arm plays in the UK’s tech sector and its significant contribution to our economy. We want that to continue to be the case.

“The government monitors mergers and acquisitions closely and when a takeover may have a significant impact on the UK, we will not hesitate to investigate further and take appropriate action.”

“We are investigating this deal further and ministers have spoken to the relevant companies. The deal was announced early this morning and we will be scrutinising it in close detail, including exactly what it means for the Cambridge headquarters.”

Japanese technology group SoftBank bought Arm four years ago in what was seen as the first test of the Conservative government's plan to step in and prevent foreign takeovers of British firms that are seen as strategically important.

Jensen Huang, founder and chief executive of Nvidia, said the two companies would create a firm “fabulously positioned for the age of AI”.

“Uniting Nvidia's AI computing capabilities with the vast ecosystem of Arm’s [computer chips], we can advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IoT, and expand AI computing to every corner of the globe.

He said the combined company would expand its presence in Cambridge, building a world-class AI research facility to develop technology for healthcare, life sciences, robotics, self-driving cars and other fields

“And, to attract researchers and scientists from the UK and around the world to conduct groundbreaking work, Nvidia will build a state-of-the-art AI supercomputer, powered by Arm CPUs. Arm Cambridge will be a world-class technology centre.”

Arm chief executive Simon Segars said he was “excited” to join Nvidia.

“Arm and Nvidia share a vision and passion that ubiquitous, energy-efficient computing will help address the world’s most pressing issues from climate change to healthcare, from agriculture to education,” he said.

But unions and industry analysts raised concerns about the impact of the deal.

Mike Clancy, general secretary of Prospect union said: “This sale is a worrying development for the UK tech industry and for the talented workforce at Arm, despite the assurances given by Nvidia about the future of the company.

“If the UK tech sector is to flourish and create the jobs of the future here in Britain, then we need our crown jewels to be owned and managed in a sustainable way that prioritises investment in the workforce and in research and development.

“It is not too late for the government to take a more hands-on approach to this deal and impose some binding conditions to secure a stable future for Arm that benefits the whole country.”

Geoff Blaber, an analyst at CCS Insight, warned that the deal would be “detrimental” to Arm and its ecosystem.

He said Arm is “first and foremost a licensing business” and the deal with Nvidia “offers little real synergy despite the extraordinarily high price tag”.

Although Nvidia said it was committed to maintaining Arm’s licensing model and “global customer neutrality”, Mr Blaber said that would be difficult to be maintained if taken over by a fellow chip producer.

“Independence is critical to the ongoing success of Arm and once that is compromised, its value will start to erode,” Mr Blaber said.

“This [deal] will rightly face huge opposition, most notably from Arm licensees who have collectively shipped an average of 22 billion chips annually over the last three years.

“A huge diversity of businesses from Apple to Qualcomm are dependent on Arm and will be motivated to unite in opposition.

“Nvidia has a mountain to climb in securing regulatory clearance. This process will take months if not years with a high chance of failure.

“This process would be damaging to all parties and the uncertainty alone would hurt Arm regardless of the outcome.”