Turning Chip Firm’s IPO into a Battle for Semiconductor Influence by Apple, Amazon, Microsoft, and Other Arm Clients

According to reports, 10% of the shares to be sold in the IPO have been put aside by Arm and its owner SoftBank Group for its customers

Arm Holdings’ commitment to not taking a side in the chip industry is being put to the test by a stampede among its clients, who include the largest technological companies in the world, to purchase shares in its initial public offering (IPO).

According to Reuters, Apple, Amazon, Intel, Nvidia, Alphabet, Microsoft, Samsung Electronics, and TSMC are among the clients of Arm that have had discussions about getting a piece of the IPO. In the IPO, which will begin on the Nasdaq next month, Arm is aiming for a valuation of up to $70 billion (approximately Rs. 5,80,600 crore).

According to those involved with the conversations, these corporations’ interest is motivated by a desire to deepen their business partnership with Arm and prevent their competitors from gaining an advantage.

This is due to the fact that Arm’s clients value its semiconductor designs as a priceless asset. They are employed by more than 260 technological companies to produce over 30 billion chips annually, which are used in everything from the smallest sensors to the most potent supercomputers and power 99 percent of all smartphones worldwide.

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According to the sources, an IPO investment might enhance links with each participating firm and make it more difficult for a rival to purchase Arm later on, even though it would not come with a seat on Arm’s board or the power to direct strategy.

“These guys want to be able to feed their technology needs back into Arm so that their needs get put into Arm’s intellectual property,” said Jack Gold, the creator of the technology consulting firm J. Gold Associates.

According to the sources, 10% of the shares to be sold in the IPO have been put aside by Arm and its owner SoftBank Group for its clients. Considering that just 10% of Arm’s shares will be sold in the IPO, they have resisted calls for larger allocations on the grounds that doing so would reduce the stock’s liquidity.

SoftBank and Arm declined to comment.

The specifics of the IPO conversations between Arm and its customers—discussions about which had not previously been reported—illustrate how sensitive the company’s neutrality as “the Switzerland of chips” is today. Because other chip makers who were Arm’s clients complained to antitrust regulators about its proposal to sell Arm to Nvidia for $40 billion (approximately Rs. 3,31,800 crore) last year, SoftBank is now pursuing the IPO.

A significant Arm customer is Nvidia, which has licenced Arm’s technology to power a new processor for data centres that may help it gain market share from seasoned competitors like Intel and Advanced Micro Devices Inc.

Nvidia opted not to respond.

iOS and Samsung

Apple is another significant client of Arm that is in discussions to invest in the IPO. It was a member of the group that established Arm in 1990 and has been utilising its technology for the chips that run its Mac and iPhone computers. Its tight ties to Arm have aided in the development of semiconductors that have reduced its dependency on Intel as a supplier.

An inquiry for comment was not answered by an Apple spokesperson.

Samsung’s partnership with Arm has also been influenced by its ambition for greater autonomy and lower production costs for smartphones. The sources claim that the CEO of SoftBank, Masayoshi Son, and the executive chairman of the Korean corporation, Jay Lee, have developed relationships. Son has Korean ancestry but was born in Japan.

An inquiry for comment was not answered by Samsung.

Arm has primarily been used by Intel to create customised networking chips. But as it grows its foundry business and competes with TSMC in chip contract manufacturing, it needs a closer partnership with Arm to guarantee that it can build Arm-based chips for clients.

A representative at Intel declined to comment.

Many technology firms use TSMC for its low-cost manufacturing while attempting to produce their own chips using Arm’s designs. Because of this, TSMC is pushing for the adoption of Arm’s designs.

An inquiry for comment from TSMC was not answered.

Alphabet, Amazon, and Microsoft

To power the servers supporting its cloud business and lessen its dependency on Intel and Advanced Micro Devices for chip supplies, Amazon employed Arm to design its own processor called Graviton. As it creates additional gear, it wants to deepen the relationship, according to the sources.

Amazon chose not to respond.

Alphabet and Microsoft are catching up to Amazon in terms of semiconductor self-sufficiency.

While Microsoft wants to make sure that its Windows platform is compatible, Alphabet is eager to secure supplies for its Pixel line of Android phones.

Microsoft and Alphabet declined to comment when contacted.

The investments made by any of these businesses in Arm’s IPO are uncertain. In a recent deal with its Vision Fund, SoftBank valued Arm at $64 billion; it’s probable that some businesses may object to the price expectations.

Dylan Patel, chief analyst at semiconductor consulting company SemiAnalysis, said, “The valuation seems kind of high and people are waiting to see what valuation comes in at.”