About 70% of the world’s population uses products based on its technology, according to company estimates. (Photo: 123RF)
The British champion of microprocessors Arm, a subsidiary of the Japanese SoftBank, is preparing to enter the stock market on Wall Street on Thursday. Here are five things to know about this company which is aiming for a valuation close to US$52 billion (US$B).
In almost all smartphones
Arm is a global benchmark in the design of semiconductor architectures, then manufactured under license by its customers for almost the entire global smartphone market.
Its processor models have thus been integrated into the manufacturing of more than 99% of smartphones worldwide in 2022.
Founded in 1990, Arm sees its technology also contained in the majority of tablets and digital television screens, and in a significant proportion of chips with integrated processors.
About 70% of the world’s population uses products based on its technology, according to company estimates.
Arm receives a per-unit royalty on almost all chips designed and manufactured with its technology.
The company, which employs some 6,000 employees in Europe, Asia and the United States, posted turnover for 2022 stable at US$2.68 billion.
A British flagship
Arm, headquartered in Cambridge, the heart of Britain’s cutting-edge sciences, including the pharmaceutical giant Astrazeneca and one of the most renowned university centers in the world, is considered a flagship of British industry.
The company was listed on the London Stock Exchange before being bought by SoftBank in 2016 for US$32 billion.
The announcement in March of an IPO across the Atlantic for this company, considered strategic, was a hard blow for the British government and Prime Minister Rishi Sunak, who had been trying for months to obtain a listing at home. of their technological jewel.
A planned megacession of Arm to the American Nvidia, announced in 2020, but abandoned in early 2022 in the face of “significant regulatory obstacles”, had given the British government a cold sweat, which insisted on the “vital role of Arm in the technology sector” and the economy in the United Kingdom.
Arm intends to play a strategic role in generative artificial intelligence (AI), which is currently generating worldwide enthusiasm.
According to the manufacturer, its microprocessors already allow all modern smartphones to be compatible with artificial intelligence and machine learning (automated learning).
But some analysts question ARM’s ambitions in this market, in which the company has yet to demonstrate that it is essential.
Competition from Open Source
One of the main challenges for Arm is the development of the open and royalty-free RISC-V architecture, to the detriment of its own models.
One of its main customers, Qualcomm, with whom Arm has been in litigation since 2022 over intellectual property issues, last month launched a joint venture with other industry players to “advance the adoption of RISC -V on a global scale”.
The growing success of this technology “is the biggest risk for Arm” as the latter “is already making inroads into mid- and low-end applications,” and “it seems inevitable that Android and Microsoft will eventually adopt RISC- V” to reduce their costs, according to Albie Amankona, analyst at Third Bridge.
Dependence on China
Nearly a quarter of the company’s turnover is generated by a single customer, Arm China, an entity which despite its name is controlled neither by the British microprocessor manufacturer nor by its parent company SoftBank, which only have an indirect and minority stake.
“We depend on our commercial relationship with Arm China to access the Chinese market.” And “if this commercial relationship no longer existed or deteriorated, our ability to compete in (this) market could be significantly and adversely affected,” Arm warns in the documents filed for its IPO.
The company is also particularly sensitive to the international tensions which have increased in recent years around this strategic sector, between China and the United States in particular.