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A $40bn (£29bn) takeover of UK chip designer Arm by US giant Nvidia will be subject to an in-depth inquiry by the UK's competition watchdog.

Citing security and competition concerns, Digital Secretary Nadine Dorries told the Competition and Markets Authority (CMA) to launch a phase two investigation.

An initial inquiry by the CMA found "significant competition concerns".

Nvidia said, however, that the merger would boost competition and innovation.

The firm said in a statement: "We will continue to work with the UK government to resolve its concerns".

"The phase two process will enable us to demonstrate that the transaction will help to accelerate Arm and boost competition and innovation, including in the UK", Nvidia said.

Chips based on Arm's designs are used in a wide range of applications, including in the silicon inside many Apple products.

Announcing her decision, Ms Dorries said: "Arm has a unique place in the global technology supply chain and we must make sure the implications of this transaction are fully considered."

"The CMA will now report to me on competition and national security grounds and provide advice on the next steps."

In a letter to both Arm and Nvidia setting out the reasons for the decision, officials provided more detail on the national security concerns.

It suggested that the deal could see a "potential reduction of the UK's autonomy to develop, operate or support defence and security systems that utilise Arm IP (intellectual property)".

The deal also faces a competition probe by the European Commission.