Dec 20 (Reuters) - UK's competition watchdog said on

Friday chip design software maker Synopsys' ( SNPS ) $35 billion

acquisition of Ansys ( ANSS ) could reduce innovation and lead

to higher prices but that it could approve the deal if those

concerns are resolved.

The Competition and Markets Authority (CMA) said after

its initial Phase 1 probe that the deal raises competition

worries in the supply of semiconductor chip design and

light-simulation products in the UK.

The watchdog said the merger could reduce choice for

customers and could lead to a loss of innovation, lower quality

software and higher prices which might be passed onto UK

businesses and consumers.

"Semiconductor chips are crucial components in

technologies used every day by UK consumers and also in key

sectors including artificial intelligence and cloud computing,"

the CMA said.

The companies now have the opportunity to submit

proposals to address the regulator's concerns and if suitable

proposals are not submitted, it will progress to an in-depth

probe, the CMA said.

Synopsys ( SNPS ) and Ansys ( ANSS ) did not immediately respond to

Reuters' requests for comment.