A Japanese success story meets the British tech wonder. SoftBank, the Tokyo–based Internet, media, and telecom conglomerate, is going to acquire the processor core designer ARM for nearly $32 billion. But how does it all make sense?
Image courtesy of ARM.
A simple, and probably the safest, answer comes down to the new tech order of the day otherwise known to the world as the Internet of Things or IoT. According to SoftBank’s CEO Masayoshi Son, “ARM will be an excellent strategic fit with the Softbank group as we invest to capture the very significant opportunities provided by the Internet of Things.”
The Cambridge, England–based ARM, which sells processor cores to chipmakers around the world, has already won the mobile war with all major smartphone chipset designers—from Apple to Samsung and Qualcomm to MediaTek—using the ARM cores. The next frontier is inevitably the IoT, and here the stakes are too high for the British design house.
ARM’s IoT Ambitions
A corporate parent with deep pockets can help ARM win the diverse IoT markets and fulfill the vision of becoming a tech giant. ARM currently employs around 4,000 people and generates more than $1 billion in annual revenues, mostly in the form of intellectual property (IP) fees for processors and system-on- chip (SoC) designs.
The IoT seems to be the key motive behind the deal. Image courtesy of ARM.
SoftBank has vowed to preserve ARM’s organizational independence, keep its headquarters in Cambridge, England, and at least double the number of employees during the next five years.
The all-cash deal will also provide ARM with resources to aggressively invest in the IoT markets. It’s worth noting that ARM has recently acquired the imaging and computer vision firm Apical for $350 million.
Secondly, within the IoT value chain, ARM lies in the middle, selling processor cores for chips that power the IoT edge nodes. These edge nodes eventually are hooked to the large network infrastructure where SoftBank owns some valuable assets.
SoftBank, for instance, owns 83% of stakes in Sprint, the fourth largest telecom operator in the United States. Then, SoftBank owns Vodafone’s Japanese business that is known to be one of its cash cows. So there could be a long-term synergy in the deal that marks the largest acquisition of a European semiconductor firm.
The Japanese Connection
Both ARM and SoftBank have a fascinating history. SoftBank began as a software distributor, and over the years, it has built a technology empire that encompasses publishing, e-commerce, telecommunications, search, gaming and more. ARM’s roots in the PC industry and its ascendance as embedded and mobile processor design powerhouse are also well-documented.
But there is a particular history byte worth mentioning here. In the early days of ARM inception, when the company founders were struggling to establish the licensing model, ARM’s founding CEO Robin Saxby used to travel to Japan regularly.
Sir Robin Saxby was a frequent flier to Japan during the early 1990s. Image courtesy of the IET.
During one such visit to Sharp’s headquarters in Nara, Saxby asked Mike Muller—one of the co-founders and later company CTO—to take his photo in front of Sharp’s signboard. That was meant for good luck. Eventually, Sharp became ARM’s third licensee in 1993 and that put ARM on the semiconductor industry map. TI shortly followed with a big licensing deal.
The time has brought the Britain’s crown jewel to Japan once more, this time in an entirely different context. The deal has created a big wow factor and the coming days will bring more details and clarity to what it means for the semiconductor industry.