A hidden champion is a company that hardly anyone outside the industry knows. What’s more, at British chip technology company ARM, its products exist only as designs – blueprints for integrated circuits – and the resulting chips are built into devices in such a way that users hardly ever see them. However, the importance of the company can hardly be overestimated. Almost all current smartphones and tablets use chips that have been developed and manufactured based on ARM designs or licensed. Be it Apple or Samsung and many other manufacturers – they are all customers of ARM.
ARM designs and licenses are not only in demand because of the business with mobile devices such as smartphones. Experts expect that they will also be used more frequently in calculations for AI projects in the future. ARM chips are considered to be significantly more power efficient than other chip designs. It’s no wonder that established competitors such as Intel and AMD are keen to become anchor investors in ARM.
Because the owner of the company, the Japanese telecommunications group and major investor Softbank, wants to take ARM public. It could be one of the largest IPOs in tech history. However, it should not be quite as lucrative as hoped for a short time ago. Softbank has now also taken over the 25 percent stake in ARM that previously belonged to the Vision Fund, which is the conglomerate’s investment fund in which others also have investments. Softbank wants to keep by far the largest share.
Masayoshi Son, head of Japanese conglomerate Softbank.
(Photo: Kyodo News/imago images)
Details of the acquisition are expected to be announced this Monday when ARM releases documents for its IPO, insiders who spoke to Reuters news agency say. With the placement, Softbank will probably sell fewer shares than originally planned and will hold up to 90 percent in the chip designer in the future. The proceeds from the IPO are likely to be lower than the last planned eight to ten billion dollars. A valuation of the chip designer at 60 to 70 billion dollars was under discussion for the IPO. A person familiar with the matter added that Arm will report a 1 percent decline in revenue to $2.68 billion for the fiscal year ended March 31 when it presented the IPO filings.
The Vision Fund has had many problems of late
Softbank bought Arm for $32 billion in 2016. The following year, the Japanese technology investor passed on a quarter of the shares to the Vision Fund 1 (VF 1) fund for eight billion dollars. The takeover of VF-1’s shares at a valuation of $64 billion is also a consolation for the fund’s biggest investors – sovereign wealth funds Public Investment Fund (PIF) of Saudi Arabia and Mubadala of Abu Dhabi. Many bets from Softbank and its investment fund VF 1 had failed, for example in the office rental company Wework or the Uber rival Didi. WeWork had recently warned of a possible bankruptcy.