Five things to know about British chip champion Arm

Five things to know about British chip champion Arm
by AFP Staff Writers
London (AFP) Sept 14, 2023

Here are five things to know about British chip designing giant Arm, which will launch a blockbuster listing on Wall Street on Thursday.

The company, owned by Japan's SoftBank, is targeting a valuation of more than $52 billion on the Nasdaq stock exchange for its initial public offering (IPO), the largest New York has seen for almost two years.

- Nearly all smartphones -

Rather than making chips itself, Arm licenses designs for the essential component that enables devices to function.

Founded in 1990, it dominates the global market for chips for smartphones. Its processors were found in more than 99 percent of all the world's smartphones in 2022.

Arm technology is also found in the majority of tablets and digital TV screens, as well as sensors, cloud services and chips with integrated processors.

About 70 percent of the global population uses products based on Arm technology, according to the company's own estimates.

More than 30 billion chips with Arm design were shipped in the financial year to March 31, an increase of around 70 percent since 2016.

Arm earns royalties for nearly all the chips designed and produced using its technology.

- A British success story -

Arm is based in Cambridge, a city renowned for cutting-edge UK science and home to pharmaceutical giant AstraZeneca as well as one of the world's leading universities.

The announcement in March that Arm, a strategic British success story, was planning to list in New York, was a blow to the UK government.

Prime Minister Rishi Sunak had sought for months to persuade it to list in London, where the top-tier FTSE 100 shares index is seeking to remain a strong global force amid increased competition from European rivals following Brexit.

US chip giant Nvidia in February scrapped a blockbuster $40-billion takeover of Arm, after objections from competition regulators in Britain, the European Union and the United States.

The failure of the bid was a financial blow for SoftBank, which had purchased Arm in 2016 for $32 billion.

The UK government was particularly alarmed by the takeover bid, given what it said was Arm's vital role in Britain's technology sector.

- Artificial intelligence -

Arm hopes to play a strategic role in generative artificial intelligence (AI), which is capable of learning from data to create new content such as text, music, speech, video and code.

The company says its microprocessors already make modern smartphones compatible with AI and machine learning.

Future generations of Arm chips could contribute to the emergence of algorithms for use in new applications, particularly in AI.

- Open Source competition -

One key challenge for Arm has been fierce competition from so-called "open source" technology that requires no royalty payments, hitting demand for its own products.

RISC-V is a freely-available standard which companies can deploy to design chips.

US chipmaker Qualcomm -- locked in a legal dispute with Arm since 2022 over intellectual property issues -- is a key RISC-V customer and wants the global industry to embrace it.

"The growing adoption of RISC-V chip architecture is the biggest risk for Arm," noted Third Bridge analyst Albie Amankona, highlighting its lower cost.

- Dependence on China -

Nearly 25 percent of Arm's turnover is generated by a single client -- Arm China.

Despite its name, the latter is neither controlled by Arm nor by SoftBank, which indirectly owns a minority share.

"We depend on our commercial relationship with Arm China to access the (Chinese) market," said Arm in its pre-IPO documents.

"If that commercial relationship no longer existed or deteriorates, our ability to compete in the (Chinese) market could be materially and adversely affected," it warned.

The company is particularly susceptible to the rising international tensions around the strategic chip sector, particularly between the United States and China.

TSMC plans $100 million investment in Arm IPO: board
Taipei (AFP) Sept 12, 2023 - Taiwanese chip giant TSMC said Tuesday its board has approved an investment of up to $100 million in British chipmaker Arm when it lists on New York's Nasdaq exchange this week.

Taiwan Semiconductor Manufacturing Company controls more than half of the world's output of microchips, the lifeblood of the modern economy found in everything from smartphones to cars and missiles.

It said in a statement its board of directors "approved an investment in Arm Holdings in an amount not exceeding US$100 million based on Arm's share price at IPO (Initial Public Offering)".

Arm will be listed on the Nasdaq on Thursday in the biggest such offering in two years, a multi-billion-dollar wager by principal shareholder SoftBank Group in a still uncertain market.

SoftBank hopes to raise between $4.5 billion and $5.2 billion through the offering of some 10 percent of the chip designer.

That values the jewel of British technology, whose products are used in 99 percent of the world's smartphones, at up to $52 billion.

Taiwanese media said TSMC and Arm have been partners for many years and signed a cooperation agreement as early as 2000.

Arm also aims to be a major player in artificial intelligence and its IPO follows a surge in the share price of chipmakers such as Nvidia.

Interest is booming in companies building the hardware needed for AI to flourish in the wake of the successful launch of the chatbot ChatGPT.

Nvidia is among the technology leaders listed as "cornerstone investors" in Arm, along with other tech titans such as Advanced Micro Devices, Apple, Google International, Intel and Samsung Electronics, Arm said in a filing last week.