exchanges
Chip developer Arm files for IPO in New York
Storm clouds form over the New York Stock Exchange building. photo
© J David Ake/AP
The British company Arm designs the chip architectures that have prevailed in the smartphone market. Arm is now returning to the stock market after seven years.
The chip designer Arm, whose technology is found in practically all smartphones, makes its own IPO official. The company, which belongs to the Japanese technology group Softbank, published its stock market prospectus yesterday.
The document initially gave no information on the volume and price of the arm share placement on the Nasdaq technology exchange. However, it is expected to be the largest IPO of the year in the US.
Stable profits
The stock exchange prospectus shows, among other things, that the arm business yields stable profits. In the past fiscal year ended March, Arm made a profit of $524 million on sales of around $2.68 billion. In the previous fiscal year, it had been a profit of $549 million on sales of around $2.7 billion.
Apple and Samsung, among others, are developing the processors for their smartphones based on the chip architectures designed by Arm. The semiconductor company Qualcomm, whose chips power many Android phones, also uses it. The companies pay royalties to Arm for using the chip architectures.
The arm designs prevailed in smartphones and tablet computers against chip systems from Intel – partly because they use less power. Now chips based on Arm architectures are also used in data centers, and Apple uses them in its Mac computers.
risks to the business
In terms of risk factors, Arm devoted a lot of space to business in China in the prospectus. A quarter of ARM’s proceeds came from the world’s largest smartphone market last year. The licenses for Arm’s chip designs are sold there by the company Arm China, in which Chinese investors hold a majority of 52 percent. Arm owns only ten percent of the Softbank subsidiary, which controls the rest of the shares. Arm sees risks for the business both in this structure and in the technology competition between Beijing and Washington. Some high-performance ARM chips are already being hit by US restrictions on exports to China.
Softbank bought British company Arm in 2016 for $32 billion and delisted it. A sale to the chip group Nvidia failed last year due to concerns from competition watchdogs and arm customers. Then the IPO was decided. Softbank intends to retain a majority interest in Arm after the share placement.
According to information from the financial service Bloomberg, Softbank was considering a total valuation of $60 billion to $70 billion for Arm for the IPO. Originally, a proceeds of eight to ten billion dollars were targeted – but the income could be lower because Softbank wanted to keep a larger stake, it said.