Nvidia’s plans to purchase UK-headquartered ARM for $40bn seem to be under threat. The deal was referred to the UK competition authorities by the UK government in April, and media reports are now saying that the deal is likely to be blocked.
Even as regulatory decisions go, such a decision seems a little perverse given the chip designer was bought by a Japanese investment fund only four years ago without any difficulties. Why is US ownership more problematic than Japanese?
The start of supply chain nationalism?
The last four years have seen the US and now the British government move away from the globalist approach taken in the previous decades, and the pandemic if anything has vindicated this strategy as supply chains were stretched to the breaking point by border shutdowns.
The UK’s swift vaccine rollout is seen as a success by the current government, and it was made possible by an early decision by the UK Prime Minister Boris Johnson to keep key parts of the manufacturing process within Britain.
Translating that thinking into action is not proving easy for the UK government. When Newport Wafer Fab, a chip plant in Wales, announced it was being bought by Chinese-owned Nexperia in July, the government initially approved the deal before changing tack and ordering a national security investigation. But it seems the purchase has gone ahead anyway, as the Shanghai Stock Exchange received notification from the purchaser last week.
Newport Wafer Fab is not a large plant – it sold for about £63mn and it is not the world’s most advanced, working on a 200nm process (Taiwanese semiconductor plants are down to 3mn). In an additional wrinkle, US semiconductor start-up Ideal Semiconductor said on August 13th its contract at the plant has been cancelled because of the takeover.
Perhaps the UK government will make a retrospective decision with Newport Wafer, but it seems hard to guess what the plan is for ARM. If the Nvidia purchase of ARM is blocked, SoftBank will probably IPO that company, as that is what private equity companies do. There is no guarantee that will happen in London, though. Winding back the globalization clock is not easy.
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