London, Nov 17 (IANS): Graphic chip giant Nvidia's $40 billion acquisition of the British chip designer Arm is now facing a deeper scrutiny by the UK watchdog.

In an updated notice, the UK's Competition and Markets Authority (CMA) said late on Tuesday that the government is publishing the CMA's Phase 1 report which recommends moving to a Phase 2 investigation on competition grounds.

"The CMA has found that the transaction may result in a substantial lessening of competition across four key markets: Data centres, Internet of Things, automotive and gaming," the UK watchdog said.

Nadine Dorries, the Secretary of State for Digital, Culture, Media and Sport, has issued a Phase 2 probe under Section 45(4) of the Enterprise Act 2002.

This instructs the Competition and Markets Authority to carry out Phase 2 investigation on the grounds of both competition and national security.

The CMA will have 24 weeks to conduct this investigation before delivering a final report and the deadline may be extended by up to eight weeks.

The European Commission last month opened an in-depth investigation to assess the $40 billion acquisition of Arm by Nvidia.

The Nvidia deal to purchase the UK-based Arm from SoftBank for $40 billion was announced in September last year.

The European Commission has also opened an in-depth investigation to assess the $40 billion acquisition of chip designer Arm by graphic chip giant Nvidia.

The Nvidia deal to purchase the UK-based company Arm from SoftBank for $40 billion was announced in September last year.

The Commission said that the merged entity would have the ability and incentive to restrict access by Nvidia's rivals to Arm's technology, and that the proposed transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.

"While Arm and Nvidia do not directly compete, Arm's IP is an important input in products competing with those of Nvidia, for example in data centres, automotive and in Internet of Things (IoTs)," said Margrethe Vestager, Executive Vice-President and responsible for competition policy.

The Commission will carry out an in-depth investigation into the effects of the transaction to determine whether its initial competition concerns regarding these markets are confirmed, and will take a decision by March 15, 2022.