Arm is preparing for one of the most hotly anticipated IPOs in recent memory. The SoftBank-owned firm is responsible for designing 99% of chips in all the world’s smartphones and works with the biggest names in the industry to integrate their tech into the latest designs. Now, with Arm’s IPO fast approaching, the world’s largest technology companies and chip manufacturers are itching to get in on the action.
The chip designer plans to offer 10% of the shares scheduled to be sold during the IPO for its clients. That opens the door for an impressive roster of suitors, including the likes of Apple, Amazon, Intel, Nvidia, Alphabet (Google), Microsoft, Samsung, and TSMC. As these giants battle for a chance to get nestle closer to the world’s leading chip designer, Arm is eyeing a mind-boggling valuation of up to $70 billion.
The massive valuation some foresee for Arm’s IPO is questionable, though. SoftBank valued the firm at $64 billion during a transaction with its Vision fund earlier this year. But the smartphone market is in decline thanks to stagnant innovation and decreased device turnover. This leads some experts to believe the valuation could scare some would-be investors away.
Dylan Patel, chief analyst at SemiAnalysis said, “The valuation seems kind of high and people are awaiting what valuation comes in at.”
Analysts believe the British firm could instead be valued closer to $52 billion. Arm currently plans to price its shares between $47 and $51 each when they arrive on the Nasdaq later this month.
The chip designer’s IPO marks its return to the public market after being bought by SoftBank in 2016 for $32 billion. Since then, the firm has undergone a tumultuous path back to the U.S. stock market.
SoftBank previously tried to sell Arm to Nvidia for a sum of $40 billion—which would have been the largest chip deal in history had it not been blocked by antitrust concerns. Other Arm clients voiced heavy concern about Nvidia taking over since it would gain too much of an advantage over chipmakers like Intel and AMD.
Historically, Arm has remained neutral in its affairs. This has kept it out of trouble as it supplies and licenses designs to many of the world’s most influential companies simultaneously. However, this stance is being tested ahead of the IPO as those same clients vie to snap up the chip designer’s shares.
According to a Reuters report citing sources close to the matter, an Arm IPO investment is attractive since it could help participating companies strengthen their connection to the chip designer. Moreover, holding a solid chunk of shares makes future acquisition by a competitor far less likely.
Technology consultant Jack Gold told Reuters, “These guys want to be able to feed their technology needs back into Arm, so that their needs get put into Arm’s intellectual property.”
Indeed, the firms hoping to participate in the IPO need Arm’s designs. Intel relies on Arm for custom networking chips and now needs a closer relationship with the designer as it aims to ramp up its Foundry Services division. The largest competitor in that space, TSMC, uses Arm designs to churn out chips for its customers around the world through low-cost manufacturing.
In the tech sector, Apple has been using Arm technology since the 1990s to power its devices, including its iPhones and Macs. The partnership was a large factor in Apple's move away from using Intel as a key supplier. Amazon, meanwhile, partnered with Arm to develop its in-house Graviton chip, which now powers its booming AWS cloud business. Microsoft and Alphabet are also working towards self-sufficiency with their own chips and Arm designs promise to be key.
For now, executives of the interested companies are mulling their final decision to invest. TSMC told Reuters it plans to make a decision “this week” and others are likely to follow. As the IPO date inches closer, the future of Arm, and indeed the future of the chip industry, will begin to take shape. While the British designer will continue servicing its diverse network of clients, those who get closer through an IPO investment could gain a significant competitive edge moving forward.