CMA investigation comes amid a slew of buyouts seen as a threat to UK\u2019s economy and national security<\/p>\n
Last modified on Fri 20 Aug 2021 13.28 EDT<\/p>\n
The UK competition watchdog has found the takeover of Cambridge-based chip designer Arm by US rival Nvidia raises serious competition concerns, and has launched an in-depth investigation into the $40bn (\u00a329.5bn) deal.<\/p>\n
The Competition and Markets Authority (CMA) said the controversial deal could reduce competition in markets reliant on semiconductor chips, which act as the \u201cbrain\u201d in all electronic devices, pushing up prices of products from cars and games consoles to mobile phones and data centres.<\/p>\n<\/p>\n
The investigation comes amid concerns about the threat to Britain\u2019s economy and national security from a string of recent takeovers of UK companies by foreign rivals and private equity firms.<\/p>\n
The behavioural remedy offered by Nvidia \u2013 in effect a guarantee from the company not to engage in anti-competitive practices \u2013 was rejected, with the regulator saying it \u201cdoes not believe any form of behavioural remedy would address the competition concerns identified\u201d.<\/p>\n
This raises the real prospect that the deal, which is also being assessed for investigation on national security grounds by Oliver Dowden, who heads the department for digital, culture, media and sport, could be blocked.<\/p>\n
\u201cWe\u2019re concerned that Nvidia controlling Arm could create real problems for Nvidia\u2019s rivals by limiting their access to key technologies, and ultimately stifling innovation across a number of important and growing markets,\u201d said Andrea Coscelli, chief executive of the CMA. \u201cThis could end up with consumers missing out on new products, or prices going up.\u201d<\/p>\n
A spokesperson for Dowden\u2019s department said a copy of the CMA phase one report had been received and that the \u201cdigital secretary will make a decision on whether to proceed to the next phase of the investigation in due course\u201d.<\/p>\n
Earlier this week the business minister, Kwasi Kwarteng, told the CMA to investigate the \u00a32.6bn takeover of British defence firm Ultra Electronics by rival aerospace firm Cobham, which is owned by US private equity company Advent.<\/p>\n
Kwarteng ordered the investigation saying \u201cthe UK is open for business, however foreign investment must not threaten our national security\u201d.<\/p>\n
Last month, Boris Johnson was forced to step in to review the purchase of the UK\u2019s largest producer of semiconductors by a Chinese-owned manufacturer, after being criticised for waving the deal through after the Welsh secretary said he was \u201csatisfied\u201d that security risks had been taken into account.<\/p>\n
The government moved to investigate the sale of Newport Wafer Fab to Chinese-owned manufacturer Nexperia using powers under the new National Security and Investment Act, which was brought in to protect key national assets from foreign takeover.<\/p>\n
Other major deals for British companies in the offing include a \u00a37bn bidding war for supermarket group Morrisons, Coventry-based defence supplier Meggitt, which is being pursued by two US aerospace companies and asthma inhaler maker Vectura, which is subject to a \u00a31.1bn offer from tobacco company Philip Morris International.<\/p>\n
\u201cSeveral deals have lately caught the attention [of regulators and government] and there is a sense of there being a raid on top British companies,\u201d said Neil Wilson, chief market analyst at Markets.com. \u201cTory governments don\u2019t like to be too interventionist, but they also don\u2019t like to appear asleep at the wheel when blue chips get hoovered up.\u201d<\/p>\n
The takeover of Arm is of particular concern as an increasingly severe global shortage of semiconductor chips has disrupted the manufacture of a swathe of goods from mobile phones to cars, making control of companies in the sector a geopolitical issue.<\/p>\n
\u201cThe chip technology industry is worth billions and is vital to products that businesses and consumers rely on every day,\u201d said Coscelli. \u201cThis includes the critical data processing and data centre technology that supports digital businesses across the economy, and the future development of artificial intelligence technologies that will be important to growth industries like robotics and self-driving cars.\u201d<\/p>\n
Arm Holdings, which employs 6,500 staff including 3,000 in the UK, is a global leader in designing chips for smartphones, computers and tablets. Nvidia is one of more than 500 users of Arm\u2019s designs worldwide \u2013 which include Apple, Samsung and Qualcomm \u2013 and critics have said its takeover will ruin its status as the \u201cSwitzerland\u201d of the semiconductor industry.<\/p>\n
\u201cWe look forward to the opportunity to address the CMA\u2019s initial views and resolve any concerns the government may have,\u201d a spokesperson for Nvidia said. \u201cWe remain confident that this transaction will be beneficial to Arm, its licensees, competition and the UK.\u201d<\/p>\n