SoftBank Plans To Strike A 'Strategic Alliance' Between Arm And Samsung

SoftBank Plans To Strike A 'Strategic Alliance' Between Arm And Samsung

Masayoshi Son, founder and CEO of SoftBank Group Corp, said on Thursday that he intends to meet with Samsung Electronics to negotiate a prospective “strategic alliance” between the South Korean tech behemoth and chip designer Arm.

The billionaire will visit Seoul for the first time in three years. “I’d like to discuss a strategic alliance with Arm with Samsung,” Son said.

The statement follows remarks by Samsung Vice Chairman Jay Y. Lee, who was quoted by newswire News1 as saying that Son “may propose” during a visit scheduled for next month. Samsung did not respond to the report.

SoftBank paid $32 billion for Arm, whose technology powers Apple’s iPhone and nearly all other smartphones. A successively proposed deal to sell Arm to Nvidia sparked industry opposition. It failed to clear regulatory hurdles, prompting SoftBank to outline plans for the Cambridge-based firm to be listed in the United States.

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The visit coincides with speculation about the possibility of forming an industry consortium to invest in Arm and ensure its neutrality.

“There needs to be someone in the middle mediating to bring various companies together into a consortium, and Son may be trying to play such a role,” said Lee Min-hee, an analyst at BNK Investment & Securities.

“A potential proposal could be that companies interested in owning a part of Arm can enter in a pre-IPO placement at a lower price ahead of an IPO next year,” he added.

Executives at tech giant SoftBank are now primarily focused on monetizing the business. The company reported a significant loss at its investment arm Vision Fund and reduced its ownership of Alibaba Group Holding to raise money.

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However, efforts to list the chip designer coincide with a sharp decline in dealmaking due to unstable markets brought on by rising interest rates and Russia’s invasion of Ukraine. For the year so far, the Philadelphia SE Semiconductor Index has decreased by about a third.

As the market leader in memory chips invests heavily to try to catch up with Taiwan Semiconductor Manufacturing Co. in logic chips, a partnership with Arm might make strategic sense for Samsung.

Technical barriers in the original technology for non-memory chips, such as application processor architecture, which Arm specializes in, are still hindering the South Korean conglomerate.

Intel Corp., whose CEO Pat Gelsinger expressed interest in joining a consortium to purchase the chip designer in February, is another potential buyer of Arm. 

According to the Yonhap news agency, Samsung rival SK Hynix has also expressed interest in Arm. Vice Chairman Park Jung-ho said the chipmaker was considering forming a consortium to acquire Arm in March. At the time, the business declared that the remark did not refer to a specific strategy.

Arm is suing Qualcomm Inc., which has also been mentioned as a potential investor, claiming trademark infringement and license agreement violations.

Kirk Boodry, an analyst with Redex Research, warned clients in a note that the disagreement might impact an Arm listing.

“Arm probably needs all its customers onside to command a premium valuation,” he said.

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