Arm, the British chip designer that powers most of the world’s smartphones and tablets, is preparing for what could be the biggest tech IPO of the year. The company, which is owned by Japan’s SoftBank Group Corp., is seeking to raise $8 billion to $10 billion in a listing on the Nasdaq in early September, according to Reuters.
Among the potential investors that have been in talks with Arm about joining the offering is Amazon.com, the e-commerce and cloud computing giant. Amazon’s interest in Arm, which has not been previously reported, highlights the importance of the chip company in the cloud computing market. Amazon Web Services (AWS), the internet giant’s cloud business, makes its own processing chip called Graviton, using Arm’s design.
Why Amazon wants a stake in Arm?
Amazon is one of the leading cloud providers in the world, competing with Microsoft, Google, and Alibaba. AWS offers a range of services and products to help customers run their applications and data on the cloud, such as computing, storage, networking, databases, analytics, machine learning, and artificial intelligence.
One of the key factors that determines the performance and cost of cloud services is the processing chip that powers the servers. Traditionally, most cloud providers have relied on chips made by Intel or AMD, which use a technology called x86. However, in recent years, some cloud providers have started to develop their own chips using Arm’s technology, which is more energy-efficient and flexible.
Amazon was one of the first cloud providers to launch its own Arm-based chip, called Graviton, in 2018. The chip was designed to offer lower costs and better performance for some workloads, such as web servers, containers, and microservices. In 2019, Amazon introduced Graviton2, a more powerful version of the chip that supports 64-bit applications and offers up to 40% better price-performance than comparable x86-based instances.
By becoming an anchor investor in Arm’s IPO, Amazon could strengthen its relationship with the chip company and gain access to its latest technology and innovations. This could help Amazon improve its competitive edge in the cloud market and offer more value to its customers.
What Arm’s IPO means for SoftBank?
Arm’s IPO is also expected to be a much-needed boost for SoftBank, which is struggling to turn around its massive Vision Fund, after many of its bets on technology startups soured. SoftBank acquired Arm in 2016 for $32 billion, hoping to leverage its dominance in mobile devices and expand into new areas such as internet of things (IoT), artificial intelligence (AI), and autonomous vehicles.
However, SoftBank’s plans were disrupted by regulatory hurdles and market challenges. Last year, SoftBank agreed to sell Arm to Nvidia Corp., a leading maker of graphics chips, for $40 billion. But the deal faced opposition from antitrust regulators in the U.S., Europe, and China, as well as from some of Arm’s customers who feared losing access to its technology. The deal was eventually scrapped earlier this year.
Since then, Arm has been focusing on preparing for its IPO, which could value it at $60 billion to $70 billion. The company has been performing better than the broader chip industry thanks to its focus on data center servers and personal computers that generate higher royalty payments. Arm also has a loyal customer base that includes Apple, Samsung, Qualcomm, Huawei, and many others.
By listing Arm on the Nasdaq, SoftBank hopes to cash in on its investment and reduce its debt load. SoftBank also plans to retain a stake in Arm after the IPO and benefit from its future growth potential.
How Arm’s IPO could impact the chip industry?
Arm’s IPO could also have significant implications for the global chip industry, which is facing a severe shortage of supply amid surging demand from various sectors such as consumer electronics, automotive, industrial, and healthcare. The shortage has caused delays and disruptions for many companies and consumers around the world.
Arm’s technology is widely used by many chip makers and device manufacturers across different markets and applications. By going public, Arm could gain more visibility and credibility among investors and customers. It could also attract more talent and resources to develop new products and services that could address the current and future needs of the chip industry.
Arm’s IPO could also create more opportunities for collaboration and innovation among its partners and competitors. For example, Intel recently announced that it would offer foundry services to other chip makers using both x86 and Arm technologies. This could help Intel diversify its revenue streams and compete with rivals such as Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics Co., which dominate the foundry market.
Arm’s IPO could also spur more consolidation and competition in the chip industry. For instance, Nvidia could look for other acquisition targets to expand its presence in the data center and AI markets after failing to buy Arm. Similarly, other chip makers such as Qualcomm or Broadcom could also consider buying or merging with smaller players to gain scale and market share.
