As it seeks to pull off what could the largest initial public offering (IPO) of the year, Arm Holdings Ltd spent more than 3,500 words explaining the risks it faces in China, a critical market that accounts for about one-quarter of its revenue.
In a chunky section of the IPO filing’s 330-page prospectus, the British designer of chips detailed a litany of challenges in the nation: a concentration of business in the People’s Republic of China (PRC) that “makes us particularly susceptible to economic and political risks affecting the PRC”; a downward spiral in Asia’s biggest economy; rising political tensions with the US and the UK, and the potential complete loss of control over its pivotal Chinese subsidiary.
Arm runs most of its China business through an independent unit, called Arm Technology (China) Co (安謀科技中國), which is its single largest customer and accounted for about 24 percent of its sales in the year that ended in March, but Arm and its parent, Japan’s Softbank Group Corp, do not control that business.
Photo: Reuters
Instead, Softbank owns approximately 48 percent of Arm China, with the majority held by local investors, including entities affiliated with Allen Wu (吳雄昂), Arm China’s former chief executive officer who was fired over allegations of conflicts of interest in 2020. The prolonged power struggle still leaves open the risk of leadership changes and affects regional operations.
“We depend on our commercial relationship with Arm China to access the PRC market,” the filing says. “If that commercial relationship no longer existed or deteriorates, our ability to compete in the PRC market could be materially and adversely affected.”
More immediately, a slowdown in the world’s biggest smartphone market and manufacturing hub, as well as steps by the US and its allies to limit China’s access to leading-edge technology, are eating into sales. Arm had to sell architecture for lower-performance chips in China, the company said.
Arm’s royalty revenue growth in China slowed in the last fiscal year, and the company warned that royalty revenue and licensing revenue could take further hits.
Arm’s biggest customers include Apple Inc, which relies on China for close to 20 percent of its revenue every year, with its major hardware lines all powered by Arm-based processors. Leading mobile chipmakers Qualcomm Inc and MediaTek Inc (聯發科) sell the bulk of their chips, built on Arm designs, to Chinese smartphone makers.
The Cambridge-based company depends on a handful of companies for a majority of its sales. Five entities, including Arm China, accounted for a combined 57 percent of Arm’s total revenue for the fiscal year that ended on March 31, the filing says.
“A significant portion of our total revenue comes from a limited number of customers, which exposes us to greater risks than if our customer base were more diversified,” the filing says.
Arm is expected to target a valuation of US$60 billion to US$70 billion in its IPO, Bloomberg News has reported.
GROWING OWINGS: While Luxembourg and China swapped the top three spots, the US continued to be the largest exposure for Taiwan for the 41st consecutive quarter The US remained the largest debtor nation to Taiwan’s banking sector for the 41st consecutive quarter at the end of September, after local banks’ exposure to the US market rose more than 2 percent from three months earlier, the central bank said. Exposure to the US increased to US$198.896 billion, up US$4.026 billion, or 2.07 percent, from US$194.87 billion in the previous quarter, data released by the central bank showed on Friday. Of the increase, about US$1.4 billion came from banks’ investments in securitized products and interbank loans in the US, while another US$2.6 billion stemmed from trust assets, including mutual funds,
AI TALENT: No financial details were released about the deal, in which top Groq executives, including its CEO, would join Nvidia to help advance the technology Nvidia Corp has agreed to a licensing deal with artificial intelligence (AI) start-up Groq, furthering its investments in companies connected to the AI boom and gaining the right to add a new type of technology to its products. The world’s largest publicly traded company has paid for the right to use Groq’s technology and is to integrate its chip design into future products. Some of the start-up’s executives are leaving to join Nvidia to help with that effort, the companies said. Groq would continue as an independent company with a new chief executive, it said on Wednesday in a post on its Web
JOINT EFFORTS: MediaTek would partner with Denso to develop custom chips to support the car-part specialist company’s driver-assist systems in an expanding market MediaTek Inc (聯發科), the world’s largest mobile phone chip designer, yesterday said it is working closely with Japan’s Denso Corp to build a custom automotive system-on-chip (SoC) solution tailored for advanced driver-assistance systems and cockpit systems, adding another customer to its new application-specific IC (ASIC) business. This effort merges Denso’s automotive-grade safety expertise and deep vehicle integration with MediaTek’s technologies cultivated through the development of Media- Tek’s Dimensity AX, leveraging efficient, high-performance SoCs and artificial intelligence (AI) capabilities to offer a scalable, production-ready platform for next-generation driver assistance, the company said in a statement yesterday. “Through this collaboration, we are bringing two
Even as the US is embarked on a bitter rivalry with China over the deployment of artificial intelligence (AI), Chinese technology is quietly making inroads into the US market. Despite considerable geopolitical tensions, Chinese open-source AI models are winning over a growing number of programmers and companies in the US. These are different from the closed generative AI models that have become household names — ChatGPT-maker OpenAI or Google’s Gemini — whose inner workings are fiercely protected. In contrast, “open” models offered by many Chinese rivals, from Alibaba (阿里巴巴) to DeepSeek (深度求索), allow programmers to customize parts of the software to suit their
RSS