The U.K. will look into Nvidia Corp.’s proposed $40 billion acquisition of British chip designer Arm Ltd. to determine if the deal could potentially pose national security issues.

The probe was announced today following a public interest intervention notice from U.K. Digital Secretary Oliver Dowden. “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,” Dowden stated.

The investigation is set be carried out by the U.K.’s Competition and Markets Authority, which will prepare an official report detailing any problems it may identify in the deal. The report will look at potential jurisdictional and competition issues, as well as possible national security concerns. The regulator will produce a “summary of any representations it receives on potential national security issues arising from a consultation it will launch to gather third-party views,” according to the U.K. Department for Digital, Culture, Media & Sport.  

“Alongside the CMA’s process, the government will examine the national security public interests,” the announcement for the investigation elaborated.

The Competition and Markets Authority will prepare the report by midnight June 30. From there, Nvidia’s proposed acquisition of Arm can go in several directions. The U.K. government could approve the transaction, or make its approval conditional on the companies fulfilling certain requirements.

The deal might alternatively be referred to a more in-depth “phase two” investigation. In the latter scenario, the Competition and Markets Authority would be tasked with taking a closer look at any issues that are found with the transaction during the initial probe and produce recommendations on how to remedy them.

Nvidia hopes that buying Arm will allow it to gain a presence in more parts of the semiconductor market. Arm’s chip designs power the processors inside billions of devices, from Apple Inc.’s iPhones to autonomous vehicles and public cloud servers. Acquiring the firm would enable Nvidia to strengthen its existing data center business, as well as become a major player in segments such as the mobile device industry where it currently has a limited footprint.

The U.K.’s decision to open the probe today follows a February report that claimed Qualcomm Inc. had voiced concerns about the deal to regulators worldwide. Qualcomm, which makes processors for a significant portion of the world’s smartphones, uses Arm chip designs in its products. The company reportedly told regulators that it believes there’s a “very high risk” Nvidia could prevent other chipmakers from accessing Arm technology in the event the deal is approved.

The deal was previously also criticized by one of Arm’s co-founders.

For its part, Nvidia has sought to alleviate concerns the deal may reduce other chip firms’ access to Arm technology. When Nvidia announced plans to acquire the first last September, it committed to “maintaining the global customer neutrality that has been foundational to its success.” The graphics card maker also pledged to set up a center of excellence dedicated to artificial intelligence research on Arm’s U.K. campus, along with an AI supercomputer and a startup incubator.

Image: Nvidia