UK may block Nvidia’s takeover of Arm on security concerns

The US tech group has agreed to buy the business from Japan’s Softbank

Nvidia Inc’s US$40bn takeover of UK microchip designer Arm may be blocked by the government for national security reasons, according to reports.

The US tech group has agreed to buy the business from Japan’s Softbank, but the deal has attracted a storm of criticism since it was announced in September, initially on competition grounds but now apparently for national security issues as well.

Arm, currently owned by Japan's SoftBank Group Corp 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.

According to Bloomberg, the government received a report from the Competition and Markets Authority on 20 July that as well as looking into the competition issues highlighted worrying implications for national security and that the UK was currently inclined to reject the takeover.

Sources at the office of Oliver Dowden, UK digital secretary, said a decision would be made on the next phase of the investigation in due course.

The news comes as two other UK defence companies are set to change hands, with US private equity-controlled Cobham accruing Ultra Electronics and a bid this week for military vehicles group Meggitt PLC from US rival Parker-Hannifin Corp sparking calls at least much more scrutiny for all such military deals and potentially be blocked.

We continue to work through the regulatory process with the U.K. government, said an Nvidia spokesperson in a statement. We look forward to their questions and expect to resolve any issues they may have.

Shares in Nvidia fell as much as 2.7% in trading on Tuesday.

Nvidia boss Jensen Huang has said he wants to retain Arm’s name and expand its base in Cambridge.

Arm’s low energy chips are used on hundreds of devices globally and some competitors are worried about the implications if a leading chipmaker such as Nvidia takes it over.

Companies using the firm’s chips include Apple, Samsung, Qualcomm and MediaTek, with the group happy to license its chips to anyone willing to pay.