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What will happen to Arm?

Daniel Nenni

Daniel Nenni

Admin
Staff member
Now that the $66B ($80B+ in today's NVDA stock value) Nvidia bid is dead what will happen to Arm? Softbank paid $32B for Arm in 2016 and put billions more into it. There seem to be (4) options pending:

(1) Stay inside Softbank (not likely)
(2) Consortium buyout (not likely)
(3) Independent company buyout (not likely)
(4) IPO (very likely)

“We’re not big users of Arm, but we do use Arm,” Pat Gelsinger told Reuters, “we’re going to get to be bigger users of Arm as we make it part of our IFS agenda as well. So, if a consortium would emerge, we would probably be very favorable to participate in it in some manner.”

This seems like a really bad idea on so many levels.

My guess is that Arm will IPO. Some folks think Arm is not profitable but I disagree. After the acquisition Arm went on a spending spree and can easily be paired down to a profitable level. ARM has also seen a nice 26% revenue surge in 2021 due to the recent 5G phone upgrades and that should continue into 2023. Plus, after many years of trying, I see Arm penetrating the PC and server markets. Now that systems companies dominate the chip design business, Arm and other IP vendors will continue to surge. And these systems companies will work with Arm and their massive silicon proven ecosystem versus RISC-V, my opinion.

ARM Financial Performance.jpg
 
hist78 said:
ARM is a for profit business. It's very hard for a non-profit consortium to own it.
Click to expand...

I don't think you understand.

A not-for-profit can make a profit, but any profit made must be used for its purposes. It can keep profits as long as there is a genuine reason for this and it is to do with its purpose.

So for instance, a not-for-profit who could buy ARM, use any profits ARM makes to invest in ARM further to make more money later on, as long as it will help the not-for-profit latter on.

Seriously, watch the movie "All the money in the world". A Grandfather who owns a not-for-profit worth multiple billions of dollars (oil money) refuses to pay the ransom of his grandson. He lives in a mansion, buys multi-million dollar pieces of art, all whilst using the money of the not-for-profit as it would in the future add value to the not-for-profit organisation to help meet their goals....

​

 
hist78 said:
ARM is a for profit business. It's very hard for a non-profit consortium to own it.
Click to expand...

It can be done. My point is that having competitors manage Arm through a consortium would not work. Also, there could be competitive legal issues if big Arm customers like QCOM, Samsung, and Apple controlled it leaving other Arm customers out of the loop.
 
Daniel Nenni said:
It can be done. My point is that having competitors manage Arm through a consortium would not work. Also, there could be competitive legal issues if big Arm customers like QCOM, Samsung, and Apple controlled it leaving other Arm customers out of the loop.
Click to expand...
Dan, I tend to agree. But I'm sure you also remember that ARM originally had a 3 (or was it 4 ?) owner consortium (ARM, VLSI Technology, Acorn Computers). Worked then as a start-up. Don't see it working now though.

On your other point on ARM profitability - it was consistently very profitable before the SoftBank takeover. So I'd trust those numbers more than SoftBank's. Hard to see how it would not be profitable now - though the operational costs of ARM must be mainly labour and that's certainly got more expensive for them over the past few years.
 
tooLongInEDA said:
Dan, I tend to agree. But I'm sure you also remember that ARM originally had a 3 (or was it 4 ?) owner consortium (ARM, VLSI Technology, Acorn Computers). Worked then as a start-up. Don't see it working now though.

On your other point on ARM profitability - it was consistently very profitable before the SoftBank takeover. So I'd trust those numbers more than SoftBank's. Hard to see how it would not be profitable now - though the operational costs of ARM must be mainly labour and that's certainly got more expensive for them over the past few years.
Click to expand...

Yes, we published a book on ARM a while back so I know the history very well:


I was pretty close to Arm before the acquisition. From what I remember Softbank let Arm run loose with deep pockets so they hit the R&D budget hard and a lot of people from Softbank moved over for PR, marketing, etc... All new faces. Prior to the acquisition Arm was mean and lean. Hopefully they can cut the fat and leverage all of the R&D money spent. Given that I see no issue with an IPO.
 
Arm should IPO. Arm as an independent public company was successful before. I had a large personal investment in ARM prior to the Softbank takeout, and despite the premium I was disappointed by the sale. The company would have done better remaining public.
 
DaRAGingLunatic said:
I don't think you understand.
A not-for-profit can make a profit, but any profit made must be used for its purposes. It can keep profits as long as there is a genuine reason for this and it is to do with its purpose.

So for instance, a not-for-profit who could buy ARM, use any profits ARM makes to invest in ARM further to make more money later on, as long as it will help the not-for-profit latter on.

Seriously, watch the movie "All the money in the world". A Grandfather who owns a not-for-profit worth multiple billions of dollars (oil money) refuses to pay the ransom of his grandson. He lives in a mansion, buys multi-million dollar pieces of art, all whilst using the money of the not-for-profit as it would in the future add value to the not-for-profit organisation to help meet their goals....
Click to expand...
Let me explain it a little bit more. The nonprofit consortium needs to be big enough (in terms of initial funding) to buy ARM. Consequently the usual suspects of the consortium members who can afford to pay big money will be Intel, AMD, Nvidia, Qualcomm, Apple, TSMC, Samsung, SMIC, Broadcom, Mediatek, Microsoft, Google, Amazon, Facebook, Tesla, etc. Some of them are fierce competitors to each other and some of them even offer competing technologies against ARM. Some of them may not even want ARM to become stronger. Can this consortium operate for the best interest of ARM? Can this consortium keep pumping money into ARM whenever ARM needs addental investment?

If we look those existing consortium formed by the industry, they typically focus on setting standards, specifications and qualification. It's a very different situation than ARM who has real for profit products and services.
 
I just did a call on this with other so called experts in the field. The consensus is that Arm will IPO next year. They may not hit the $80B value of the Nvidia deal but it will be above and beyond the $32B purchase price so Softbank will save some face. The China issue should be resolved before the IPO, so says the new CEO, Arm still owns 49% of the joint venture.

All is good with Nvidia, they are still committed to Arm with a very long license deal. Nvidia will also use RISC-V for embedded stuff but not for application facing processors. The thing people miss is the Arm ecosystem. It is extremely powerful and leveraged by Arm. The other thing is the Arm customers, like EDA and Foundry customers, are now dominated by the systems companies like Apple, Samsung, Google, Amazon, etc... Automotive companies are all over ARM content on SemiWiki as well. Systems companies are low risk and write some very big checks and that is what the Arm ecosystem is all about.

I do hope the IPO starts out low so I can buy a chunk and put it in my retirement bucket.
 
count said:
Arm should IPO. Arm as an independent public company was successful before. I had a large personal investment in ARM prior to the Softbank takeout, and despite the premium I was disappointed by the sale. The company would have done better remaining public.
Click to expand...

I was told that being the CEO of a publicly traded semiconductor IP company is like having quarterly colonoscopies. I had a feeling a different CEO would lead the IPO and Rene Haas is the right guy to do it, absolutely.
 
Daniel Nenni said:
www.scmp.com

Exclusive: Arm China asserts right to go public independent of British semiconductor firm Arm

The defiant head of Arm China said the company may go public in either Shanghai or Hong Kong after 2025.
www.scmp.com www.scmp.com
Click to expand...
Wu said Arm China’s biggest contribution to the mainland’s chip design industry was to open the company’s source codes to domestic customers, “giving them freedom to develop their chips and raise their capabilities to a global level”.

..

Seems like blatant theft of IP?
 
Daniel Nenni said:
www.scmp.com

Exclusive: Arm China asserts right to go public independent of British semiconductor firm Arm

The defiant head of Arm China said the company may go public in either Shanghai or Hong Kong after 2025.
www.scmp.com www.scmp.com
Click to expand...
This looks like a horrible mess which is not getting any better. For me, this sort of thing lowers the value of ARM in any IPO - you aren't totally sure what you're buying. I realise this isn't a popular opinion, but in some ways ARM might do better as part of a much larger company in dealing with this type of thing. It also reinforces my suspicion that nVidia ownership (whatever one might think of it) could be no worse than SoftBank's. SoftBank created this problem.
 
ARM is clearing the executive ranks. Expect more fat cutting in preparation for the IPO, absolutely. Four of the top seven execs are out and this will be a top down trim. My expectation is a 5-10% total RIF.
 
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