The Competition and Markets Authority (CMA) has officially opened an investigation into the planned $40 billion acquisition of Cambridge-based chip designer Arm on national security grounds.

The CMA, after being prompted by culture secretary Oliver Dowden, are to draft a report on the deal by the end of July for him to approve, approve with certain conditions, or order a more thorough investigation to be launched.

The report will cover jurisdictional and competition issues, such as increased prices for consumers and businesses, and any potential national security issues that could arise from the deal.

Arm, which boasts 6,500 staff worldwide, designs processors are widely used in consumer electronic devices such as smartphone tablets, but also some desktops and super computers.

The chip designer claim 180 billion ARM chips have been produced as of 2021, that ARM’s design is the most widely used instruction set architecture (ISA).

Japanese conglomerate SoftBank, who also have significant holdings in Alibaba, Uber, and Slack had acquired Arm for $32 billion in 2016.

NVIDIA agreed to acquire Arm in a transaction valued at $40 billion in November 2020, with founder and chief executive at NVIDIA Jensen Huang claiming “the combination will turbocharge Arm’s R&D capacity and expand its IP portfolio with NVIDIA’s world-leading GPU and AI technology.”

In 2020, over 2,000 UK business leaders signed an open letter calling on Boris Johnson to stop the merger, claiming UK jobs and global influence were at risk.

Arm has not issued a comment on the news.

Herman Hauser, who founded Arm’s original parent company Acorn Computers in 1978 said “the takeover clearly relates to national security as well” particularly given “the importance of our IT infrastructure, which is correctly compared with our water and electricity infrastructure.”

“Following careful consideration of the proposed takeover of Arm, I have today issued an intervention notice on national security grounds,” said Dowden. “We want to support our thriving UK tech industry and welcome foreign investment but it is appropriate that we properly consider the national security implications of a transaction like this.”

He added: “The phase one investigation will ensure specific considerations around competition, jurisdiction, and national security are assessed.”

A Nvidia spokesperson said: “We do not believe that this transaction poses any material national security issues.”

They added: “We will continue to work closely with the British authorities, as we have done since the announcement of this deal.”

“There is not a single important semiconductor company in the world which does not have an Arm licence,” said Hauser. “Nvidia has an opportunity to become the quasi monopoly supplier of microprocessors to the world."

He added: "This [deal] will give Nvidia a dominant position in all processor segments and create another US technology monopoly which has created so much angst in Britain when the country worries about the surreptitiously controlling influence Google, Facebook, Netflix and Amazon has on the UK economy.”

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