According to analysts, Chinese regulators could be the main obstacle to NVIDIA Corp's attempt to buy British chipmaker Arm from Softbank Corp. for $40 billion.

The huge deal was announced in early September. Measured by market capitalization and global influence, the deal will create the largest chip company in the west. But it will not be easy, and a number of regulators, including the Ministry of Commerce (MOFCOM) and the State Administration of Market Supervision (SAMR), can be involved.

"technically, Beijing can block this deal," Abishur Prakash, a geopolitical expert at the Center for the Future of Innovation (Center for innovation the Future), a Toronto-based consultancy, told CNBC via email. ".

This is not the first time Chinese regulators have blocked American chip companies from acquiring European companies. In 2018, SAMR blocked Qualcomm Inc's attempt to buy Dutch chipmaker NXP.

Bill Ray, a senior analyst at Gartner, the research firm, told CNBC in an email that Chinese regulators "will seek specific guarantees before approval".

He added that "some of these guarantees may be beyond NVIDIA Corp's ability", in particular calling for the continued provision of Arm intellectual property rights (IP) to Chinese companies.

According to Ray, NVIDIA Corp might reassure Chinese regulators that Arm's technology is British and that future investments in the UK will ensure that the technology remains in the UK. But it's not that straightforward.

"providing support to China should not be a problem. "he said. However, this ignores the US influence over the UK and the ability of the US government to influence companies beyond its apparent jurisdiction. "

"it is not surprising that China is expected to be a major obstacle to regulatory approval," said Geoff Blaber, vice president of research at analyst firm CCS Insight. "

"China's technology industry is based on Arm, so it has a vested interest to maintain the status quo, especially if the proposed situation is owned by a US company," Blaber added. Regulatory review is inevitable, and Arm Technology China's ownership structure adds further complexity. "

The Ministry of Commerce, SAMR and the Chinese Embassy in London did not immediately respond to CNBC's request for comment. When contacted by CNBC, NVIDIA Corp, NVIDIA Corp declined to make a new statement on the matter, but pointed out his chief executive Huang Renxun's previous comments that Huang Renxun was confident that the deal would be approved.

A spokesman for Arm said: "NVIDIA Corp, Arm and Softbank Corp. believe that all regulatory approvals will be obtained. "

British science and technology hero

Arm is widely regarded as the crown jewel of the British technology industry. Its energy-efficient chip architecture has been used in 95% of the world's smartphones and 95% of chips designed in China.

The Cambridge-based company has a joint venture with Hopu Investments, a Chinese private equity firm, called Arm China. Arm China is headquartered in Shanghai, which means Chinese regulators will have the right to review the proposed Nvidia deal.

The Chinese chip industry urged Beijing to investigate the deal and warned that it would hand over a key technology used by almost all mobile phones in the world to the US.

Members of the US Congress have been cracking down on Huawei for years, saying the company poses a threat to national security. In May, the US imposed new export controls on Huawei, aimed at restricting the company's use of chips made by US equipment. The following month, the United States added Huawei to a list of 20 Chinese companies said to be owned or controlled by the Chinese military.

The Global Times, another state-owned newspaper, also urged Beijing to intervene. An editorial also warned: "the possibility that Arm could be politicized and become a US technological weapon against Chinese technology companies must be taken seriously." ".

Chinese chip designers, including Huawei's Hayes chip design department, are worried that they will not be able to obtain Arm's IP after a deal with NVIDIA Corp, the Financial Times reported. "after being acquired, will it still find a way to provide us with intellectual property rights? "I have to say I'm a little worried," said one Hayes chip designer, who spoke on condition of anonymity. Huawei declined to comment.

It's not just China.

The deal will also be reviewed by governments and regulators in Europe, the US and the UK. Earlier this month, two British technology investors said they expected the deal to be blocked.

The deal will also be reviewed by governments and regulators in Europe, the US and the UK. Earlier this month, two British technology investors said they expected the deal to be blocked.

The deal will also be reviewed by governments and regulators in Europe, the US and the UK. Earlier this month, two British technology investors said they expected the deal to be blocked.

Arm DevSummit

The chief executives of Nvidia and Arm talked about the deal on Arm DevSummit earlier this month.

"once we explain the fundamentals of the deal and our plan, regulators around the world will realize that these are two complementary companies," NVIDIA Corp's Huang Renxun said on Oct. 6.

"We need to protect the business model, and we need to create and continue to nurture this neutral, determined, consistent and trustworthy platform so that our ecosystem can continue to flourish and even grow. "

"it's a process," said Simon Segars, chief executive of Arm. This is absolutely the right thing, and the process is thorough. But I think we'll come to an end. Everyone will realize that this is a good thing for expansion, and we will get approval. "