LONDON -- The British government is launching a national security investigation of SoftBank Group's blockbuster deal to sell chip design house Arm to U.S. graphics processor company Nvidia.
"We want to support our thriving U.K. tech industry and welcome foreign investment, but it is appropriate that we properly consider the national security implications of a transaction like this," Digital Secretary Oliver Dowden said in a statement issued Monday.
Tokyo-based SoftBank and California-based Nvidia announced an agreement last September on a cash-and-stock deal worth up to $40 billion that would make SoftBank a major Nvidia shareholder.
Nvidia pledged to keep Arm's headquarters in Cambridge and establish an artificial intelligence research center on the premises. But the government is on edge over potential technological transfers from Arm.
The government has become more sensitive over foreign acquisitions and investments in domestic companies. Last July, it said China's Huawei Technologies would be banned from the U.K.'s 5G wireless infrastructure. November saw the introduction of the National Security and Investment Bill to restrict purchases by foreign enterprises.
The Competition and Markets Authority has been instructed to prepare a report on the Arm sale, detailing the antitrust and security implications. The report, due by July 30, will guide the government on whether to approve the deal or launch another probe.
Apart from the U.K., the transaction needs to pass muster with Chinese, European and American regulators. U.S. chip companies Qualcomm and Intel, which are also Arm clients, have come out against its sale to Nvidia. Qualcomm and Intel are believed to be lobbying the authorities to intervene.