The Competition and Markets Authority (CMA) has announced an investigation into a $40bn (£29.5bn) takeover of UK computer chip designer Arm Holdings.

US graphics chip specialist Nvidia agreed on the deal to buy the company from Japan’s Softbank Group in September last year.

Britain’s competition watchdog has been scrutinising the sale, with the two companies expecting some action.

Arm technology is at the heart of most smartphones and other devices.

Its designs underpin processors made by Apple, Samsung, Sony and Huawei.

The CMA has invited “interested third parties” to comment on the impact the merger could have on competition in the UK.

Its formal investigation will begin later this year.

The CMA said it is likely to consider whether, following the takeover, Arm has an incentive to withdraw, raise prices or reduce the quality of its intellectual property licensing services to Nvidia’s rivals.

“The chip technology industry is worth billions, and critical to many of the products that we use most in our everyday lives,” said CMA chief executive Andrea Coscelli.

“We will work closely with other competition authorities around the world to carefully consider the impact of the deal and ensure that it doesn’t ultimately result in consumers facing more expensive, or lower quality, products.”

Until now, the European Commission was responsible for most large and complex competition cases involving the UK.

The CMA has taken over these responsibilities following the UK’s departure from the European Union.

Its remit, by law, is to assess the potential impact of a merger on competition.

Last year, more than 2,000 business leaders signed an open letter calling on the prime minister to stop the merger, saying UK jobs and influence could be lost.

Nvidia has promised to keep the business based in the UK, to hire more staff, and to retain Arm’s brand.

It said that the deal would create “the premier computing company for the age of artificial intelligence”.

And the company added: “We believe the approval process will take about 18 months from when we signed the deal. The regulatory process is confidential and we won’t be providing comment on milestones along the way.”