Gareth Corfield
Tue, 22 August 2023
Joe Biden has targeted China with sanctions designed to limit its access to the most advanced computer chip technology
- SAUL LOEB/AFP
Arm has warned revenues are being hit by President Joe Biden’s trade war on China as the British chipmaker unveiled plans for a $70bn (£54bn) listing in New York.
Growing tensions between Beijing and the West are already harming business, Arm said, which could intensify as governments increase restrictions on investments in artificial intelligence and other high-tech products.
The geopolitical risks threaten to overshadow Arm’s highly anticipated float, which was announced on Monday.
As part of its 330-page IPO announcement, Arm said almost a quarter of its sales come from China, which makes the business “particularly susceptible to economic and political risks” that affect the country.
The Cambridge-based company, owned by Japan’s SoftBank, develops semiconductor designs used by the world’s technology companies in billions of smartphones and similar devices.
Risks in this sector have increased after President Biden targeted China with sanctions designed to limit its access to the most advanced computer chip technology.
Arm said sales made by divisions including Arm China fell by $28m over the three months to June, including a $12m decrease in royalty revenues, which it blamed on “trade protection and national security policies” from the US that impacted China’s “semiconductor suppliers and customers”.
In December, Chinese tech giant Alibaba was blocked from buying Arm’s Neoverse chips because the UK and US said the technology could be used for military purposes against the West.
Trade sanctions resulted in an 18pc slump in Chinese chip imports during the first of the year, customs data shows.
Potential internal rifts could also pose a problem for Arm in China, Monday’s prospectus revealed.
Arm China is an independent company part-owned by SoftBank, which licenses the Arm brand and sells chip designs to local customers.
A long-running power struggle recently took place at Arm China after local boss Allen Wu refused to step down despite being sacked in 2020.
That dispute concluded last year after Wu’s eventual departure, although the company has warned investors of potential fault lines in the domestic relationship.
“If that commercial relationship no longer existed or deteriorates, our ability to compete in the PRC market could be materially and adversely affected,” it said.
Arm has warned revenues are being hit by President Joe Biden’s trade war on China as the British chipmaker unveiled plans for a $70bn (£54bn) listing in New York.
Growing tensions between Beijing and the West are already harming business, Arm said, which could intensify as governments increase restrictions on investments in artificial intelligence and other high-tech products.
The geopolitical risks threaten to overshadow Arm’s highly anticipated float, which was announced on Monday.
As part of its 330-page IPO announcement, Arm said almost a quarter of its sales come from China, which makes the business “particularly susceptible to economic and political risks” that affect the country.
The Cambridge-based company, owned by Japan’s SoftBank, develops semiconductor designs used by the world’s technology companies in billions of smartphones and similar devices.
Risks in this sector have increased after President Biden targeted China with sanctions designed to limit its access to the most advanced computer chip technology.
Arm said sales made by divisions including Arm China fell by $28m over the three months to June, including a $12m decrease in royalty revenues, which it blamed on “trade protection and national security policies” from the US that impacted China’s “semiconductor suppliers and customers”.
In December, Chinese tech giant Alibaba was blocked from buying Arm’s Neoverse chips because the UK and US said the technology could be used for military purposes against the West.
Trade sanctions resulted in an 18pc slump in Chinese chip imports during the first of the year, customs data shows.
Potential internal rifts could also pose a problem for Arm in China, Monday’s prospectus revealed.
Arm China is an independent company part-owned by SoftBank, which licenses the Arm brand and sells chip designs to local customers.
A long-running power struggle recently took place at Arm China after local boss Allen Wu refused to step down despite being sacked in 2020.
That dispute concluded last year after Wu’s eventual departure, although the company has warned investors of potential fault lines in the domestic relationship.
“If that commercial relationship no longer existed or deteriorates, our ability to compete in the PRC market could be materially and adversely affected,” it said.
UK chip designer Arm starts US listing process after snubbing London
Jasper Jolly
Tue, 22 August 2023
Photograph: ARM Holdings/PA
The British chip designer Arm has started the process of listing its shares on New York’s Nasdaq, in one of the biggest flotations of recent years after the London Stock Exchange lost out.
The company, owned by Japanese investor SoftBank, registered to list its shares late on Monday night, after months of waiting amid tricky conditions for stock market floats.
The listing will return Arm to stock markets after seven years under SoftBank and its leader, Masayoshi Son, who took the chip designer private in 2016 in a £24bn deal. An internal SoftBank transaction this month valued Arm at $64bn (£50bn), according to reports.
Arm, based in Cambridge, is one of the UK’s rare big tech champions. Founded in 1990, it has played a key role in the mobile computing revolution, with its designs used for semiconductor chips in Apple’s iPhones and laptops, Samsung’s phones and a host of other devices ranging from electric and driverless cars to drones. Its chip designs have been used in more than 250bn devices.
While the company has remained rooted in the UK, the New York listing comes after a failed effort by the British government, led by Rishi Sunak, to persuade it and other tech companies to list shares in London.
The listing is the second time that SoftBank has tried to cash in on its investment. In 2021, the tech-focused investor agreed a deal to sell Arm to the US chipmaker Nvidia for $40bn. However, that deal fell through last year after UK competition regulators objected.
The US filing showed that 30.6bn chips using Arm designs were made in the year to March, up from 29.2bn the year before. However, revenues were flat at $2.7bn, and its net income dropped from $676m to $524m.
Arm has not revealed how many shares it will offer or the hoped-for valuation, although SoftBank will continue to control the company. The listing will not provide any proceeds to Arm itself.
Arm said it expected the chip market to grow by 6.8% a year until 2025, with the increasing complexity of semiconductors required to power smartphones and to train artificial intelligence algorithms allowing the company to contribute more towards the value of each chip.
The filing also revealed that Arm earns a quarter of its revenues from China. Arm said that reliance made it “particularly susceptible to economic and political risks” at a time when the US government is attempting to limit China’s access to the most advanced chip-making technology. It said US, UK or Chinese restrictions could “materially harm” its business.
The Arm chief executive, Rene Haas, has been awarded $20m in stock, and will receive a further $20m in cash if the listing completes.
Barclays, Goldman Sachs, JP Morgan and Japan’s Mizuho will lead the initial public offering of Arm’s shares, with another 24 banks lined up to share in the fees for the mega-deal.
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