British digital secretary Oliver Dowden issued a public interest intervention notice on 19 April, and has written to the Competition and Markets Authority to begin what is called a "phase one" investigation to assess the proposed transaction.
The move comes in the wake of a growing global shortage of semiconductors for a number of industries, including smartphones and automobiles, and a massive push by the US over the last few years to deprive China's Huawei Technologies of advanced semiconductors for manufacturing its more advanced smartphones.
The ARM-NVIDIA deal was announced in September last year, with NVIDIA to pay US$21.5 billion in stock and US$12 billion in cash, with an additional US$5 billion in cash or stock, depending on the targets set for financial performance. Another US$1.5 billion in equity is earmarked for distribution to ARM employees.
Dowden can intervene in public mergers on the grounds of public interest and the UK's Enterprise Act of 2002 gives him quasi-judicial powers to do so.
In a statement, he said: "Following careful consideration of the proposed takeover of ARM, I have today [19 April] issued an intervention notice on national security grounds.
“As a next step and to help me gather the relevant information, the UK’s independent competition authority will now prepare a report on the implications of the transaction, which will help inform any further decisions.
“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.”
The deadline for the CMA's report is 30 July. After that, Dowden can clear the transaction, impose some undertaking but still give the go-ahead, ask for a phase two investigation based on either grounds of public interest or competition.