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Story of the Week: SoftBank Considers the Sale of ARM



Last Monday Patently Apple posted a report titled Just as Apple is shifting to 'Apple Silicon' for Future Macs, SoftBank is Seeking a buyer of their Trailblazing ARM Chip Design Company." We had noted in the report that the news that ARM could be in play would possibly have companies like Samsung, MediaTek, Qualcomm and others trying to explore an acquisition of the company.


A mere Four days later and it was reported by the Korea Times that Samsung was keeping an eye on struggling SoftBank. With ARM's door now open to a number of powerhouse companies, this is what made it the story of the week.


The Korea Times noted in their recent report that Samsung Electronics has a rare opportunity that may not appear again after Japan's SoftBank recently put its chip-designing affiliate Arm up for sale.


Industry analysts said Thursday that Samsung must join the acquisition race as this is the fastest way for the company to become a leading player in the non-memory chip business by 2030.


SoftBank is reportedly considering either selling the chip-designing affiliate or going through with an initial public offering for the unit. It is strapped for cash after its $100 billion Vision Fund recorded losses for two consecutive quarters, hit by the COVID-19 pandemic's impact on the global economy.


To offset the investment losses, the Japanese tech giant has said it plans to sell off up to $41 billion in assets. In 2016, SoftBank acquired Arm for $32 billion, which was the company's largest-ever purchase, with the aim of expanding into the connected devices business.


Mobile application processors chips are used in most smartphones, and Apple's A-series, Samsung's Exynos and Qualcomm's Snapdragon chips are based on Arm's architecture. Every chipmaker using the architecture pays a licensing fee upfront, which depends on the complexity of the design, and royalties, which Arm gets for each chip sold.


In 2019, Samsung unveiled an ambitious plan to dominate the global logic chip sector by 2030, detailing an investment of 133 trillion won (US$111 billion) to improve its competitiveness. If one of Samsung's competitors succeeds in purchasing ARM, this could be a huge blow to the Korean tech firm, which pays royalties to ARM every year.


2 x   Samsung Heir seen with Softbank's CEO


The Korea Times added that "It remains to be seen whether [Samsung's] Vice Chairman Lee Jae-yong will pursue Arm. All eyes are also on whether Lee will use his relationship with the SoftBank CEO as a leverage point to promote Samsung as a potential buyer.


Samsung owning ARM could put Apple's business in a choke hold, exactly where Samsung would like Apple to be. They currently have control over Apple's OLED display supply.


The acquisition cost of Arm is estimated to be around $41 billion considering SoftBank plans to sell up to that value in assets as part of its debt reduction efforts. Given Samsung's ample cash-equivalent assets, it is seen as one of the "potential buyers" to purchase Arm independently.


While SoftBank's news was hot this week, other chip news broke regarding Japan's plan to invite TSMC or other chip makers to build an advanced chip manufacturing plant jointly with domestic chip equipment suppliers, according to a report published today by  Japan's Yomiuri daily – owned by the Japan Times.  

The Japanese government hopes to tap the expertise of global chipmakers to rejuvenate the lagging domestic chip industry as advanced chip technologies have become a focal point in national security issues, Yomiuri said.


The government is planning to offer a total of several hundred billion yen, or equivalent to several billion dollars, over multiple years to overseas chipmakers who join the project, the daily said, without citing sources.


Wouldn't Japan want to own SoftBank's ARM? They're waiving the money in the air and so they can't be ruled out as one of the suitors for ARM.  


In May TSMC issued a press release confirming their commitment to a new chip plant in Arizona due to pressure from the Trump Administration to safeguard chip and specific technology related to the U.S. military be made in the U.S. and not in Asia where the Chinese government could possibly gain access to such technology.  


We learned in March 2019 that the first U.S. military-qualified Arm processor for hi-rel applications was made known in connection to NPX Semiconductors. Could the U.S. back a U.S. company making a run for ARM to help secure military technology secrets?


While the earlier Korean report made the case of how important it would be for Samsung to score a win for SoftBank's ARM, one could easily make the same argument that Intel would like to return to its former glory and acquire ARM to keep Apple, Samsung and Qualcomm dependent on them.  


The what-if game could continue with why owning ARM could help Apple, NVIDIA or Qualcomm. To say the least, the stakes are very high for many.


The news of Softbank considering to sell off ARM last week rattled the tech industry. On one hand the implications could be game changing, depending on who acquires the company. On the other hand, it could be a political football. The U.S. government could get involved by pressuring U.S. companies to acquire ARM so as to keep China behind the U.S. on key technologies.  


At the end of the day, there were a number of interesting stories this week in techland, yet for me, news of SoftBank possibly selling ARM to stay viable was definitely the winner, simply because of its possible ramifications. The victor, if any, will have the power to shake up the chip industry and possibly shape the future for the technology sector for the next decade. Is that important enough?


10.3 - Patently Extra News


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