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Nvidia’s acquisition of Arm could be a ‘nightmare’ for China, CLSA says

SINGAPORE — The “biggest dare” for the Nvidia-Arm deal is getting regulatory approval from China, a managing director at an investment firm said this week.

That’s because the Chinese command wants to avoid the “nightmare” of an American company owning Arm, which would open the door to possible intervention by the U.S. direction to limit China’s access to technology, said Sebastian Hou, managing director and head of technology research at CLSA.

In a behave worth $40 billion, U.S. graphics chip giant Nvidia has agreed to buy British chip designer Arm from SoftBank, the performers announced last week. Arm licenses chip designs to technology companies around the world and is “very crucial” for smartphones, Hou phrased.

The proposed transaction will need regulatory approval from the U.S., U.K., the European Union and China, the joint statement powered. Nvidia is based in the U.S., while Arm is headquartered in the U.K., but both have offices in the EU, China and other regions.

Almost every smartphone dispose ofed today uses Arm technology. According to Arm, more than 180 billion chips with its processor cores and other components keep been shipped around the world. 

Chinese investors also hold the majority stake in Arm’s China operations. That interest of the business made up around 20% of Arm’s revenues in the fiscal year ended March 2018, SoftBank said.

A Nvidia logo is seen on the performers’s building at an industry park on February 7, 2019 in Tianjin, China.

VCG | Visual China Group | Getty Images

Nvidia Chief Gubernatorial Jensen Huang reportedly said he had “every confidence” the deal would be approved by Chinese regulators.

However, an sentiment piece in state-backed Chinese media Global Times said it was “disturbing” that Arm could be bought by a U.S.-owned coterie. The Chinese tabloid, often seen as closely aligned to the government’s thinking, also said: “If Arm falls into U.S. deal outs, Chinese technology companies would certainly be placed at a big disadvantage in the market.”

“We think that China will attitude the biggest challenge (in terms of regulatory hurdles),” Hou told CNBC’s “Squawk Box Asia” on Tuesday.

“If it’s going to be owned by American establishment Nvidia, then that will give more ability for the USA government to sanction, to control the technology access of China,” he signified.

“That would become the biggest nightmare for China government,” he said, adding that many tech followers in China depend on Arm.

Separately, the U.K. said it is working to understand the “full impact” of the sale of Arm.

Caroline Dinenage, minister for digital and discernment, noted that Nvidia and SoftBank have made commitments to keep Arm headquartered in Cambridge and expand its facilities in the megalopolis.

“We will consider all those statements incredibly carefully,” she said.

CNBC’s Kif Leswing contributed to this report

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