The U.K. Competition and Markets Authority (CMA) has opened a formal investigation into Nvidia’s $40 billion takeover of chip designer Arm after the government said the deal could have national security implications.

Digital secretary Oliver Dowden on Monday issued a public interest intervention notice relating to the proposed deal, saying,“Following careful consideration of the proposed takeover of Arm, I have today issued an intervention notice on national security grounds.”

“We want to support our thriving U.K. tech industry and welcome foreign investment, but it is appropriate that we properly consider the national security implications of a transaction like this,” he added.

Dowden has asked the CMA to prepare a report on the implications of the deal and deliver a report by July 30. The secretary has the ultimate authority to clear or junk the deal.

The deal has already been facing antitrust probes from the U.K., E.U., and the FTC of the U.S. over concerns shown by other chip manufacturers about monopoly issues. Arm is owned by SoftBank.

The manufacture and supply of semiconductors have become major issues the world over. The U.S. restrictions on Huawei and any Chinese manufacturing company using y American technology to manufacture the chips in China have affected production funnels worldwide.

Smart devices, automobiles and many other companies are facing an acute shortage of chips because of these restrictive trading practices.

“This has become the new colonialism,” said Hermann Hauser, co-founder of Arm’s predecessor company and vice-chair of a European Union advisory council on technology. “If you have sovereignty, you can independently run your economy without running to another country for semiconductors.”

The Cambridge, UK-based Arm chips are ubiquitous in the world’s cellphones. It owns and licenses a set of instructions that almost all smartphone companies lease and base their chips on.

Regulators in both Brussels and the U.K. said that the deal needed serious scrutiny, given the popularity of Arm’s designs. “This deal will be thoroughly investigated [ . . . ] and scrutiny may lead all the way to a prohibition,” said one person with direct knowledge of the situation.

The current terms of the deal, which is scheduled to close by March 2022, will see Nvidia pay Softbank $21.5 billion in stock and $12 billion in cash. In addition, if Arm meets certain financial targets, Nvidia has agreed to pay SoftBank up to $5 billion more. The sale is subject to regulatory approval from China, the E.U., the U.K. and the U.S.

Arm’s designs are widely used in the chip industry. Phones produced by Apple, Huawei, Samsung, and Qualcomm all use Arm-based chips, which are simpler than traditional processing units but draw less power.

The companies have voiced concerns that once Nvidia takes over Arm, then all competing entities in the market, including cellphone, smart device makers, and anyone who uses the chip tech of Arm, will be placed at a disadvantage and will be at the mercy of Nvidia’s largess.

At the time of purchase of Arm in September, Nvidia vowed it would retain Arm’s previous business model, under which it treated all of its licensees equally. Jensen Huang, Nvidia’s chief executive, said in a letter to the Financial Times: “I can unequivocally state that Nvidia will maintain Arm’s open licensing model. We have no intention to ‘throttle’ or ‘deny’ Arm’s supply to any customer.”

But this has not reassured the rivals and some have actively lobbied with the regulatory authorities to interfere in the matter.

“The overarching worry is the loss of neutrality of Arm. At the moment, the company is very neutral in its packages with its customers. But the worry is that in the medium and long term, Nvidia will use Arm to disadvantage other companies and pump up its own technology,” said one concerned rival.