SoftBank plots a major decision: sell ARM
Latest update time：2020-07-14
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According to the latest news from foreign media, SoftBank Group is currently considering various options for its subsidiary, British chip design company ARM, including selling all or part of its assets, or going public.
According to foreign media reports, people familiar with the matter said that Japan's SoftBank Group's review and consideration of ARM's business was provided with professional consulting by the US Goldman Sachs Group, and this evaluation is still in the early stages.
SoftBank has previously said it may take ARM public at some point in the future, but the move has gained more urgency as SoftBank seeks to raise cash from its diverse stable of assets to appease activist investor Elliott Management, which has been agitating for reforms at SoftBank.
SoftBank bought ARM for $32 billion in 2016, its largest acquisition ever, in part to expand into the Internet of Things, which connects everyday devices such as traffic signs and refrigerators to the internet, with ARM’s chips serving as the computing engines.
However, ARM said last week that it plans to transfer two IoT service units to a new entity owned and operated by SoftBank, which is also part of ARM's move to focus on its core business of chip intellectual property. ARM said that if the transaction is approved, it is expected to be completed by the end of September.
SoftBank's $100 billion Vision Fund, which invests in technology companies, holds about 25% of ARM. The Vision Fund had considered transferring these shares to SoftBank in the past because fund executives believed that ARM's weak revenue growth dragged down the overall valuation of its portfolio. SoftBank's earnings have also been hit recently due to huge losses in the Vision Fund, further affecting plans to raise a second Vision Fund.
British ARM is a semiconductor company with a unique business model. The company designed the low-power ARM chip architecture and various chip technology solutions, and then licensed these technology solutions to external manufacturers. The company does not produce and sell processors.
With the support of ARM, the threshold for technology companies to enter processor production has been greatly reduced. Almost all ARM processors on the market use the company's technical solutions. In addition, more and more smartphone manufacturers have begun to obtain technical solution licenses and launch ARM architecture application processors that are more suitable for their own products.
Recently, the ARM architecture has been promoted again. Apple announced at the 2020 Worldwide Developers Conference that it will take two years to transfer the processors of personal computer products from the traditional x86 architecture provided by Intel to the ARM architecture. In other words, Apple laptops will be able to run application software developed for smartphones and tablets in the past, and ARM processors will also have a wider range of uses.
In the past few years, due to high debt, SoftBank Group has begun various contraction measures such as selling assets. For example, its Japanese telecommunications business has been spun off and listed, and the company has sold one-third of its equity.
Not long ago, Sprint, the US telecom operator owned by SoftBank Group, was acquired by the larger T-Mobile. SoftBank Group then announced that it would transfer $21 billion worth of T-Mobile shares to seek funds for a $41 billion stock repurchase and debt reduction plan.
SoftBank Group has not yet commented on the news of selling ARM.
At the end of last year, SoftBank Group suffered the "WeWork IPO disaster". WeWork failed to go public and its valuation plummeted by 90%. Since then, the investment myth of SoftBank Group and Masayoshi Son has officially been shattered, and there has been constant criticism and doubts from the outside world.
Elliott, an American activist investment fund, has also increased its stake in SoftBank Group and started to put pressure on management to divest assets and improve operational efficiency. Masayoshi Son needs to take these calls into consideration.
Apple comes forward to acquire it?
Over the past few years, Apple has developed the A-series processors used in smartphones and tablets, which have become an important selling point for Apple hardware devices. The design of this processor is based on the technical solutions authorized by the British company ARM. Considering that Apple will also use ARM processors in all its personal computers, American technology media have analyzed whether Apple should acquire ARM.
According to foreign media reports, Apple's acquisition of ARM is not groundless. In fact, in 2010, news came out in the industry that Apple planned to acquire ARM to enrich its chip design business.
In fact, many people do not know the origins of ARM and Apple. ARM Holdings was founded in November 1990, originally named "Advanced RISC Machines Ltd.", a joint venture between Acorn Computer, Apple and VSLI Technology.
A US technology media outlet said that Apple has had a very close relationship with ARM architecture chips in the past and in the future, so it is possible that it will consider acquiring ARM. In addition, considering the relatively independent business licensing partnership, whether ARM is re-listed or its assets are sold, it will not have a substantial impact on Apple's chip design business.
In the chip business, Apple has been enriching itself through acquisitions and poaching talent. In the past, the company began to design more of its own chips, which made it difficult for suppliers to survive, and Apple poached talent from some long-term suppliers. Previously, Apple spent $1 billion to acquire Intel's smartphone 5G baseband processor business to enrich its R&D capabilities and prepare to launch its own baseband processor in the future to completely get rid of its dependence on Qualcomm.
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