The U.K. government recently put Nvidia's (NVDA  ) $40 billion effort to acquire Arm Ltd from Softbank (SFTBY  ) on hold pending a national security review. A move that comes as the ongoing chip shortage takes its toll and governments worldwide look to shore up domestic supplies of semiconductors.

The U.K. Digital Secretary Oliver Dowden employed a little-known provision to initiate the review by the countries antitrust agencies.

"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 said, reported by Bloomberg News.

Arm Ltd is sometimes known as the "Switzerland of the Semiconductor Industry." Its current business model relies on licensing its designs to as many companies as possible for the lowest possible cost.

This approach has made Arm Ltd the beating heart of the mobile chip industry, with 95% of all mobile chips patterned off the companies designs, according to the Wall Street Journal. Regulators and competitors fear that the Nvidia deal could spell an end to Arm's current business model and leave many of Nvidia's competitors out in the cold.

Nvidia's case isn't helped by the fact that they recently used Arm's technology to produce the companies first CPU, dubbed Grace. The new CPU could potentially compete for slots in servers in data centers currently occupied by Intel (INTC  ) and AMD chips (AMD  ).

Nvidia has stressed that the chip will only serve "niche applications." But Nvidia's breakout success in the data center business raises some concerns. Even without CPU's like Grace, Nvidia has managed to grow its data center business from $339 million just five years ago to $7 billion today, WSJ reports. So the fact that Nvidia is already using Arm's technology to potentially break into a new market could give U.K. regulators pause.

However, antitrust concerns aside, the U.K. review stresses the national security implications of the deal. The review reflects a shift in attitudes both across the pond and around the world as countries grapple with the ongoing chip shortage.

"There's a general sensitivity of trying to protect core technology and assets that could be critical to the U.K." Christine Phillips, a lawyer at London-based Fieldfisher, told the Wall Street Journal. Phillips notes that similar reviews in the past had primarily focused on keeping jobs and headquarters based in the U.K.

And Downing Street isn't alone in its concerns about domestic supplies of silicon. Increasingly governments around the world are beginning to see semiconductors as a vital strategic resource; a trend evidenced by Joe Biden's $50 billion proposal to boost semiconductor production, as well as the E.U. $150 billion effort to do the same.

For the time being, the U.K. Digital Secretary has given the countries antitrust authorities until July 30 to deliver a report about the deal's strategic and national security implications. Through a spokesman, Nvidia claims that the company doesn't "believe that this transaction poses any material national security issues," quoted by WSJ.

Nevertheless, the definition of what exactly is a "national security issue," is changing. And suppose countries continue to hoard their chips and block mergers. In that case, the growth of the semiconductor industry itself could be in jeopardy, regardless of what happens on July 31.