Arm Holdings, the British chip designer that powers most of the world’s smartphones, is preparing for an initial public offering (IPO) in September. The company, which is owned by SoftBank Group, has attracted some of the biggest names in the technology and chip industry as investors, including Apple, Samsung, Nvidia, Intel and Alphabet.
Arm’s IPO valuation range
According to Reuters, Arm and SoftBank are targeting a valuation between $50 billion and $55 billion for the IPO. This is lower than the $64 billion valuation that SoftBank paid to acquire the 25% stake in Arm that it did not already own from its Vision Fund last month. The move was seen as a way to raise cash after Nvidia’s $40 billion bid to buy Arm was blocked by regulators.
Arm’s IPO valuation range reflects the company’s dominant position in the chip market, as well as the potential growth opportunities in areas such as artificial intelligence, cloud computing and the Internet of Things. Arm licenses its chip designs and technology to other companies, such as Apple and Samsung, which then manufacture their own chips based on Arm’s architecture. Arm earns royalties from every chip sold by its customers.
Apple, Samsung and other strategic investors
Reuters reported that Arm’s customers, including Apple and Samsung, have agreed to invest in the IPO at the valuation range of $50 billion to $55 billion. Other notable investors include Nvidia, AMD, Intel, Cadence Design Systems, Synopsys and Alphabet. These companies have agreed to invest between $25 million and $100 million each in the IPO, according to Reuters.
The involvement of these strategic investors is seen as a way to strengthen their ties with Arm and ensure that they have a say in the company’s future. While investing in the IPO does not guarantee any special treatment, such as a seat on the board or the ability to dictate strategy, it could make it more difficult for a competitor to acquire Arm later. It could also help Arm maintain its neutrality and avoid favoring any particular customer over another.
Amazon pulls out of the IPO
One notable absence from the list of investors is Amazon.com, which had previously held talks to invest in the IPO. Reuters reported that Amazon decided not to participate for undisclosed reasons. Amazon is one of the largest customers of Arm, as it uses its chips to power its cloud computing services and devices such as Kindle e-readers and Echo smart speakers.
Amazon’s decision not to invest in Arm’s IPO could be seen as a sign of caution or dissatisfaction with the deal. It could also reflect Amazon’s preference to develop its own chip technology rather than rely on external suppliers. Amazon has been investing heavily in its own chip design capabilities, such as through its acquisition of Annapurna Labs in 2015 and its launch of Graviton processors in 2018.
The outlook for Arm
Arm’s IPO is expected to be one of the biggest and most anticipated tech listings of the year. The company has been growing rapidly in recent years, as demand for its chips has soared across various sectors and applications. In 2020, Arm reported revenue of $1.9 billion, up 17% from 2019, and operating profit of $641 million, up 36% from 2019.
Arm faces some challenges and uncertainties ahead, however. The company is still subject to regulatory scrutiny over its ownership structure and potential antitrust issues. The company also faces competition from rivals such as Intel and AMD, which are trying to challenge Arm’s dominance in mobile devices and expand into new markets such as data centers and edge computing. Moreover, some of Arm’s customers, such as Apple and Amazon, are developing their own chip designs that could reduce their dependence on Arm in the future.
Nevertheless, Arm remains confident in its prospects and vision. The company believes that it has a unique opportunity to capitalize on the growing demand for high-performance, low-power and secure chips that can enable new innovations and experiences. The company also believes that it has a strong competitive advantage due to its diverse and loyal customer base, its scalable and flexible business model, and its culture of innovation and collaboration.