Arm Holdings PLC CEO Rene Haas, gearing up for the biggest initial public offering (IPO) of the year, is pitching investors on a pivot.
His message to potential shareholders is that Arm is poised to become a bigger and more profitable business — not just because of the industrywide boom in cloud computing and artificial intelligence, but also due to a major change in how it operates.
“We made a significant shift in our strategy,” Haas said in a video presentation for prospective investors seen by Bloomberg.
Photo: Bloomberg
For most of its history, Arm’s main focus has been designing chips for smartphones and other electronics, and then selling that technology for pennies per chip to companies such as Qualcomm Inc.
However, Arm is now doing complex design work focused on specific products, tailored for what it sees as key areas of growth.
It is a “purpose-built approach” addressing the urgent needs of companies making mobile devices, cloud computing, vehicle electronics and Internet-connected technology, Haas said in the presentation.
Getting that message across is key to the lofty valuation.
Arm had said that it is seeking as much as US$54.5 billion in its IPO this week, although it is proving so popular with investors that the company might raise the price range for the shares.
The listing is oversubscribed by 10 times, and bankers were planning to stop taking orders by yesterday afternoon, a day early, people familiar with the matter had said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, is backing Arm’s IPO and plans to be a strategic investor.
The company’s board of directors has approved a maximum investment of US$100 million to subscribe to Arm’s American depositary shares, TSMC said yesterday.
By investing in Arm TSMC aims to gain an advantage for itself, as well as its customers and supply chain partners, the company said in a statement.
“Since chip designing is a highly competitive sector, it is crucial to prevent Arm from being acquired entirely by a rival,” an industry analyst, who asked to remain anonymous, told the Taipei Times yesterday.
MediaTek Inc (聯發科) is one of Arm’s top five customers and TSMC’s major customers almost all use Arm-based architecture.
MediaTek has yet to disclose what it plans to invest in Arm, although the firm’s name is on the IPO prospectus.
Chipmakers such as Qualcomm and Broadcom Inc have licensed Arm’s partial designs and computer code and put them in their own chips. The products adhere to industry standards, making it easy for software makers to ensure that various forms of technology are compatible. That is why Arm’s designs are in nearly every mobile phone made today.
Haas has flipped Arm’s emphasis, saying more is not necessarily better.
He has pushed the company to move beyond licensing the basic building blocks of chips, and instead provide customers with blueprints they can take straight to the factory and put into production.
Now Arm is charging much higher royalty rates per device, because it offers customers more complete designs that are more technologically capable.
While Arm might get paid a low-single-digit dollar figure on a US$30 main chip in a smartphone, the potential inside the kind of processor that is at the heart of a cloud data center is much greater. In that kind of environment, chips can have more than 100 computing cores, or mini processors, and Arm can charge more than US$1 per core.
The revenue opportunity in cloud computing would grow to US$28 billion by 2025, expanding at a rate of 17 percent per year from now, Arm chief financial officer Jason Childs said in the video presentation.
Additional reporting by Lisa Wang
soft landing: The US’ rate-setting FOMC finds itself in a difficult situation as it seeks to address inflation through interest rate hikes while avoiding a recession The US Federal Reserve is widely expected to hold interest rates steady on Wednesday after a summer of mixed economic data, while leaving the door open to another hike if needed. The Fed has raised interest rates 11 times over the past 18 months, lifting its key lending rate to a level not seen for 22 years as it tackles inflation still stubbornly above its long-term target of 2 percent. Analysts and traders broadly expect the US central bank to hold rates steady on Wednesday in order to give policymakers more time to assess the health of the world’s largest economy. “We think
AI TREND: TSMC has been rapidly expanding capacity to meet a spike in demand for advanced packaging services, but still expects supplies to be tight for 18 months Arizona is in talks with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) about advanced chip packaging, state Governor Katie Hobbs said yesterday, which is crucial for the manufacturing of artificial intelligence (AI) chips. TSMC, which is building a US$40 billion chip factory in the US state, has not announced plans to build facilities for advanced chip packaging in the US. Advanced packaging processes stitch multiple chips together into a single device, lowering the added cost of more powerful computing. “Part of our efforts at building the semiconductor ecosystem is focusing on advanced packaging, so we have several things in the works around that
At a sprawling South Korean arms factory on Friday, a high-tech production line of robots and super-skilled workers were rapidly churning out weapons that could, eventually, play a role in Ukraine. Since the Russian invasion last year, the Hanwha Aerospace factory in the southern city of Changwon has expanded production capacity three times, workers told reporters, as South Korea ramps up arms exports while traditional behemoths like the US struggle with production shortages. Longstanding domestic policy bars Seoul from selling weapons into active conflicts, but even so it signed deals worth US$17.3 billion last year, including a US$12.7 billion agreement with NATO
Tailwinds: Blockbuster earnings at Nvidia Corp have sparked hopes of a tech sector boom; Taiwanese chipmakers are hopeful benefits will come to them too The worst could be over for the New Taiwan dollar as China’s economic recovery and a rebound in the chip industry will support the beleaguered currency, analysts said. The NT dollar is on course to weaken for a sixth month, the longest stretch since 2006, after foreign funds turned sour on its technology sector and risk sentiment deteriorated on slower growth in China. The tide seems to be turning now on nascent signs of stabilization in China’s economy — its biggest trading partner — following policy boosts. The yuan emerged as the best-performing Asian currency last week, followed by the Japanese yen