Insight Bite: Is the Daily Mail wrong about ARM?

Nvidia’s acquisition of ARM is facing opposition on multiple fronts. The UK has initiated a probe into the deal, Chinese regulators have called to block it altogether, and ARM’s customers have raised concerns that a critical section of their supply chain could become owned by a competitor.

Against these headwinds, the case for SoftBank to switch to an initial public offering (IPO) instead is growing stronger. This would be the best outcome from the perspective of the broader tech industry, making ARM a fully independent publicly owned company, and cementing its status as unacquirable. The UK media is getting very excited about this opportunity and I was recently quoted in the Daily Mail.

Yet breaking even on an IPO could be challenging and we should not get ahead of ourselves. Acuity’s Semiconductor Index shows EV/ Revenue multiples for the industry at 7.3x, so with a predicted revenue for this year of $2.1bn, an ARM IPO would need to be close to 15x for Softbank to balance the books.”

The success of such a relisting, and the potential for ARM to avoid heavy losses, is likely to hinge on how well SoftBank can position the semiconductor designer as an enabler of next-generation technologies.

The only option may be an IPO, but ARM needs to wait until a number of its recent product initiatives – like the success of the Apple M1 processor – start to bear fruit

This fruit could come through Apple. In June last year, the world’s largest tech firm announced its intention to transition its entire computer line to ARM-based processors. Progress in this direction was recently revealed at Apple’s yearly Spring Loaded event, which was jam-packed with announcements around ARM’s M1 processor that lies at the heart of the new iPad Pro and iMac desktop.

Further down the line, ARM’s V9 chip architecture, which comes with additional features for security and AI, could also help boost relisting prospects by ensuring that ARM’s chip architecture stays deeply embedded in the tech industry.

Matthew Byatt, Partner

Matthew Byatt, Managing Partner

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