Insight Bite: ARM could be the next big semiconductor IPO

Approval of Nvidia’s acquisition of ARM is looking less likely as corporations voice dissent and antitrust authorities put the deal under the microscope.

Though Nvidia has pledged not to change how ARM operates, several of the chip designer’s customers are not convinced – suggesting they were not consulted before the transaction was proposed. Google, Microsoft and Qualcomm have all raised competition concerns, fearing that an end to the neutrality of the Switzerland of Semiconductors would imperil ARM’s impartial approach to business. This would spell bad news for Qualcomm, which relies on ARM’s designs for its Snapdragon chips, and Microsoft and Google, which favour ARM-based chips for their datacenters.

In addition, multiple antitrust authorities have begun to probe the deal. China has voiced objections about an American firm owning such a strategic player in the semiconductor industry, the EU and the UK are set to open in-depth investigations, and the US Federal Trade Commission has joined the scrutiny.

A failed acquisition might be the best outcome for global tech, but it would likely cement ARM’s status as un-acquirable. In turn, Softbank could turn to an IPO as a last resort. Founder Masayoshi Son has previously said this would be a potential option for the company.

Relisting ARM on the London or New York Stock Exchange would solve competitive concerns, and while it might prevent Nvidia from capitalizing on the growing popularity of ARM chips, the firm would still have access to the designs.

After an unexpectedly banner year for IPOs in 2020, ARM’s prospects for a public listing could be good. For a long time, IPO investors have not had the opportunity to bet on a major chip player, and the series of highly successful tech offerings over the last year could create a keen appetite for the leading chip designer.

Matthew Byatt, Managing Partner and Semiconductor Practice Lead at Acuity Advisors comments:

“It is hard to believe that ARM didn’t get a level of unofficial buy-in from their customer base before announcing an exit to Nvidia. Regardless, the transaction is facing severe headwinds and in the current climate I can’t see it happening.”

Matthew Byatt, Partner

Matthew Byatt, Managing Partner

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