Arm Holdings’ customers, including the world’s largest technology companies, are rushing to snap up shares in its initial public offering (IPO), testing the semiconductor designer’s agnostic stance in the chip industry.
According to Reuters, Arm customers that have been in talks to participate in the IPO include Apple, Amazon, Intel, Nvidia, Alphabet, Microsoft, Samsung Electronics and TSMC. Arm hopes to achieve a valuation of up to $70 billion (roughly Rs 5,806 billion) in the IPO, which will list on Nasdaq next month.
The companies are interested because they want to expand their commercial relationship with Arm and ensure their competitors don’t gain an advantage, according to people familiar with the matter.
That’s because Arm’s customers view its semiconductor designs as an indispensable resource. More than 260 technology companies use them to make more than 30 billion chips a year, powering 99 percent of the world’s smartphones and everything from the smallest sensors to the most powerful supercomputers.
While an IPO investment won’t bring Arm a board seat or the ability to set strategy, it could strengthen ties with each participating company and make it harder for rivals to buy Arm later, the sources said.
“These people want to be able to feed back their technical needs to Arm so that they can be incorporated into Arm’s intellectual property,” said Jack Gold, founder of technology consulting firm J. Gold Associates.
Arm and its owner SoftBank Group Corp. have set aside a 10% stake for their clients to sell in the IPO, the sources said. The sources added that they objected to the request for a higher allocation, arguing that it would affect the liquidity of Arm shares, as shares representing just 10% of Arm in total would be sold in the IPO.
Arm and SoftBank declined to comment.
Details of the IPO discussions between Arm and its customers have not previously been reported, suggesting the company’s neutral status as “Switzerland in chips” remains a flashpoint. SoftBank is seeking an IPO after its attempt to sell Arm to Nvidia for $40 billion (roughly Rs 3,318 billion) failed last year after other chipmakers that were Arm customers filed complaints with antitrust regulators.
Nvidia is a major Arm customer, licensing its technology to power new processors for data centers, gaining market share against longtime rivals such as Intel and Advanced Micro Devices Inc.
Nvidia declined to comment.
Apple, Samsung
Another major client Arm is in talks to invest in an IPO is Apple. It is part of the consortium that founded Arm in 1990 and has used its technology for chips that power its iPhones and Mac computers. Its close relationship with Arm has helped it design chips that are less dependent on Intel suppliers.
An Apple spokesman did not respond to a request for comment.
In its partnership with Arm, Samsung also hopes to have more autonomy and lower costs in smartphone production. The South Korean company and its executive chairman, Jay Lee, have been linked with SoftBank Chief Executive Masayoshi Son, the sources said. The son was born in Japan but has Korean ancestry.
Samsung did not respond to a request for comment.
Intel turned to Arm primarily to make custom networking chips. But as it expands its foundry business to compete with TSMC in foundry chip manufacturing, it needs to develop a closer relationship with Arm to ensure it can produce Arm-based chips for customers.
An Intel spokesman declined to comment.
Many technology companies seeking to manufacture their own chips using Arm designs have turned to TSMC for low-cost manufacturing. This has prompted TSMC to push the adoption of Arm designs.
TSMC did not respond to a request for comment.
Amazon, Alphabet, Microsoft
Amazon has used Arm to develop its own chip, Graviton, to power the servers behind its cloud business and reduce its reliance on chip supplies from Intel and Advanced Micro Devices. The company is looking to expand the partnership as more hardware is developed, the sources said.
Amazon declined to comment.
Alphabet and Microsoft are behind Amazon in chip self-sufficiency, but are following suit. Alphabet is keen to secure a supply of its Pixel line of Android phones, while Microsoft wants to ensure compatibility with its Windows platform.
Alphabet and Microsoft did not respond to requests for comment.
None of these companies is certain about investing in the Arm IPO. SoftBank recently valued Arm at $64 billion in a deal with its Vision Fund, a price expectation some companies may balk at.
“Valuations seem a little high, and people are waiting for valuations,” said Dylan Patel, principal analyst at semiconductor consultancy SemiAnalysis.
© Thomson Reuters 2023
(This story was not edited by NDTV staff and was automatically generated from syndicated feeds.)
Svlook
