Although there are some churches with a history of nearly 600 years standing in the center of Cambridge, England, about 5 kilometers to the southeast corner is a modern entrepreneurial park called "Silicon Fen", which is composed of low-rise buildings. A chip company named after "Arm" in the park has recently become the focus of global attention.
Since the 1980s, desktop computers and tiny central processing unit chips have played the role of the iPhone at that time, and Arm was born due to this wave. After that, wave after wave of trends such as smartphones, IoT (Internet of Things), and artificial intelligence emerged in the technology world, and Arm rode the waves.
This was originally a company that could not be more low-key. In 2004, it set up a booth at an exhibition in the United States, and this was the first time many electronics practitioners learned its name.
Since mid-2016, Arm has been pushed onto the stage one after another, dancing with capital predators and technology giants.
After seven years of ups and downs, Arm returned to the public stock market on September 14, 2023, local time in the United States, and landed on the NASDAQ exchange in the United States.
SoftBank Group, headquartered in Tokyo's Minato Ward, located in the embassy district and a gathering place for foreign banks, is always crowded when holding performance meetings. The management in this kind of meeting always talks about two words back and forth: offense! defense! The corporate language seems to come from "The Art of War".
SoftBank Group was founded in 1981 as a trading company for telecommunications and Internet businesses by Japanese-Korean Masayoshi Son. Today, it has become a mixed-industrial complex with telecommunications companies, semiconductor companies, and investment businesses. When SoftBank Group CFO and Chief Information Security Officer Yoshimitsu Goto mentioned
As early as 2016, SoftBank Group acquired Sprint Telecommunications Company, Yahoo Japan, and DomesticTelco Telecommunications Company of Japan through acquisitions. It also completed the acquisition of semiconductor company Arm in September 2016 and became their controlling shareholder.
Despite this, SoftBank Group is more interested in non-controlling, non-operating, but sharing investment income businesses, and its securities investments are very famous. At the performance meeting in mid-2016,
In the eyes of the public at the time, Son had both vision and courage. SoftBank Group has a good relationship with a group of local Japanese media people. When they write books and biographies for Sun Zhengyi, the titles are always full of words such as "visionary" and "network giant". Sun Zhengyi said that he was familiar with "Sun Tzu's Art of War" and reorganized it in his own language to create
In mid-2016, SoftBank Group held shares in more than 20 companies, covering e-commerce, shared transportation, financial technology, Internet and media, AI and medical health. Alibaba, the most well-known among them, once again issued an IPO on the New York Stock Exchange in the United States in 2014. After creating the largest amount of funds raised in history, it continued to create a rising stock price amidst the ups and downs.
The above history has become the basis for SoftBank Group's next move. In October 2016, SoftBank Group announced the establishment of the “Vision Fund” with the intention of expanding its securities investment business. This name actually echoes the public image previously created by Son Zhengyi. The more common translation of Vision is vision. Son’s grander plan is
In May 2017, SoftBank Group, with its investment halo, officially established the first phase of the Vision Fund, with a scale of US$91.7 billion, of which US$28.1 billion came from internal fundraising and US$63.6 billion came from external third-party fundraising. Well-known LPs include Abu Dhabi sovereign investment fund Mubadala, Apple, Foxconn, Qualcomm, Sharp, etc. At that time, this fund was already the largest corporate venture capital fund in history. Some media said that it
When the Vision Fund was founded, it was full of enthusiasm. Within two years, 73 start-up companies were included in the investment basket. Although starting a business is a matter of "narrow escape", these companies involve "hot track" fields such as robotics, Internet of Things, cloud, e-commerce, and sharing economy. In the eyes of others, SoftBank made relevant investments because it "foreseeed" the bright future.
More than ten years have passed since the "Internet Bubble" in 2000, and investors in the market have changed one after another. The Vision Fund's professional resume still has no profound technology investment lessons. The dark cloud of the “sharing economy” inadvertently floated over the Vision Fund.
From 2016 to 2019, Adam Neumann, the founder of the shared office company WeWork, gained the trust of Masayoshi Son and received multiple rounds of investment from SoftBank totaling approximately US$10 billion. But in August 2019, when WeWork made its IPO prospectus public, its financial situation made people laugh, making people realize that the concept of "sharing economy" may be tantamount to a Ponzi scheme, and its valuation immediately plummeted. The TV series "WeCrashed" produced by AppleTV describes the process of Masayoshi Son and Neumann from close contact to hatred. At the end of the TV series, Masayoshi Son paid a high price to expel the Neumanns from WeWork. However, just as Neumann was enjoying life on the beach in Israel, he received a call from Sun Zhengyi. Sun Zhengyi told him that he would use his "money power" so that Neumann would never receive the so-called buyout payment.
According to SoftBank Group's second quarter financial report for fiscal year 2019, SoftBank Group and the Vision Fund invested a total of US$10.3 billion in WeWork and its three subsidiaries, but the cumulative losses reached US$8.2 billion.
Sun Zhengyi continued to form the Vision Fund, but under the "scar" of WeWork, LP interest was greatly reduced. In July 2019, the second phase of the Vision Fund was established, but its scale was less than US$54 billion. The scale of the Latin American fund established in the same year was approximately several billion US dollars.
Then in fiscal year 2020, the U.S. stock market staged a circuit breaker, and the global stock market suffered a short-term shock, but it still gained a firm foothold afterwards. The cumulative profits of the first and second phases of the Vision Fund that year were 6.292 billion yen, and the portfolio held more than 110 companies at the end of the year.
In fiscal year 2021, the Federal Reserve is approaching to raise interest rates, which has brought substantial threats to global technology investment. The Vision Fund's book loss reached US$25.2 billion that year. Although SoftBank launched DoorDash, Coupang and Uber for IPO during the year, it was still unable to withstand the huge book losses caused by the stock market tsunami.
In fiscal year 2022, the Vision Fund's book losses even continued to rise, reaching $39.8 billion that year. This year, the four quarters of spring, summer, autumn and winter were full of suffering. In the first financial quarter (April-June), the single-quarter loss reached US$22.745 billion. Subsequently, in the second, third and fourth financial quarters, investment losses were US$9.96 billion, US$5.185 billion and US$1.88 billion respectively. The above figures add up to a total of US$39.77 billion.
It is from April 2022 that SoftBank Group has to launch a plan to liquidate Alibaba shares to "make up for" the huge shortfalls in other investment portfolios. Alibaba's stock price fell, causing a floating loss on SoftBank's books, but it would actually make a bookkeeping profit after the sale. As of the end of March 2023, SoftBank's shareholding in Alibaba dropped to 13.7% from 24.4% in the same period the previous year, and the proceeds from the realization became a profit of 4.3 trillion yen (equivalent to approximately US$35.5 billion) on the income statement. At the same time, SoftBank promoted the listing of four companies including Goto, delhivery, symbotic, and getaround, and cashed out US$7.7 billion by selling shares in companies such as Uber, DoorDash, Coupang, SenseTime, Paytm, Guardant, and Shell.
After entering the 2023 fiscal year, SoftBank continued to reduce its holdings of Alibaba stocks and completed the liquidation of Alibaba stocks before the end of June, reducing its shareholding to almost zero. At the performance meeting held on August 8, Goto Yoshimitsu said that through the sale of Alibaba shares over the years, the total cash amount has reached 80.8 billion U.S. dollars.
Why is the Vision Fund particularly vulnerable to the technological tsunami? Isn’t it diversified and each investment is looked after by a specific investment team? In fact, although SoftBank's investments seem to have "eggs scattered in different baskets", they are overly concentrated in the new economy and technology industries.
However, selling Alibaba shares still does not seem to be enough to save SoftBank. In 2023, countless companies in the Internet, biomedicine, cryptocurrency, semiconductors... these once-powerful technology tracks continue to experience market value collapse.
Son Zhengyi thought that he had another treasure in his hand.
In June 2016, Son accompanied by armed escorts came to the Turkish seaside resort of Marmaris. Just a few days ago, on June 23, the results of the British referendum on leaving the European Union were released. 51.9% of citizens chose to support leaving the European Union, which shocked the world.
Brexit is not good news for British assets. Out of fear of unknown risks, people usually reduce their allocation to British pounds or British assets. For example, the pound fell nearly 30% against the yen in the year before Britain voted to leave the European Union.
However, Son Zhengyi specially came to Türkiye to meet two British people. Arm Chairman Stuart Chambers and CEO Simon Segars were sailing on the Mediterranean. Son Zhengyi, who suddenly visited, asked them to find a landing place as soon as possible. Although SoftBank's shareholding in Arm was only 1.45% at the time, Son's tough attitude finally led the two to go ashore. In a seaside restaurant, the two received Son's first full purchase offer.
A few days later in London, SoftBank and Arm conducted more price negotiations with the participation of investment banks hired by both parties. Chambers wanted a higher price, but Son couldn't budge. Although Arm's historical performance is good, the next buyer is more concerned about its future upside.
In 1999, Keanu Reeves used the Nokia 8110 mobile phone in "The Matrix". This mobile phone, which was curved like a banana, was equipped with Arm chips. It and subsequent models sold millions of units, and also triggered a whirlwind of mobile phones using Arm chips around the world. This has allowed Arm to transition from an unknown start-up company that struggled to find big customers to a mature company with a certain degree of popularity.
Despite this, the smartphone market seemed to have reached a bottleneck in 2016, and the performance of this downstream market hindered Arm's ability to achieve performance breakthroughs. In the 12 months before June 2016, Arm's share price reached a low of 8.25 pounds per share and a high of only 11.4 pounds per share.
In the end, SoftBank was willing to pay 17 pounds per share, which was a 53.35% premium to Arm’s closing price on the last trading day before the offer. If this wasn't enough, SoftBank boldly added a condition: an all-cash transaction. This means that SoftBank’s share price for Arm reached 23.58 billion pounds, which was approximately 23.82 times Arm’s total revenue in the previous year and 52.36 times EBITDA. In other words, if Arm continues to develop at such a tepid pace, it will take SoftBank at least 50 years to recover its investment costs.
SoftBank’s acquisition of Arm is Asia’s largest investment in the UK in history, and the deal has also created a certain diplomatic effect.
The new British Finance Minister Philip Hammond expressed a positive attitude towards this transaction, calling it
The Arm board's consensus on the deal went smoothly. Among them, Baillie Gifford, headquartered in Scotland, is Arm’s largest shareholder, holding nearly 10% of the shares. This company has a unique vision in technology investment. It once firmly supported Tesla during its most difficult times and received huge returns accordingly. In addition to Baillie Gifford, well-known institutions such as BlackRock, CapitalGroup, Norges Bank, and Vanguard rank among the top holdings of Arm. This group of shareholders also nodded to SoftBank’s offer.
Compared with other cross-border transactions, SoftBank’s acquisition of Arm can be described as “quickly”. After receiving the equity acquisition offer on July 18, 2016, Arm's shareholders voted to agree on August 30, and then the British High Court gave a positive approval opinion on September 1. On September 6, 2016, SoftBank officially completed its acquisition of Arm, which took a total of 50 days.
Arm, which was originally dual-listed on Nasdaq and the London Stock Exchange, completed its delisting and became a private company of SoftBank.
Four years after acquiring Arm, SoftBank pushed Arm to change hands again. This time, it has to accept a full purchase offer from the American chip company Nvidia, which is the second "blood change" in a short period of time.
Nvidia, headquartered in Santa Clara, California, was founded in 1990 like Arm. NVIDIA accounts for approximately 70% of the global GPU market. It is also one of Arm's important customers.
On September 14, 2020, Nvidia publicly stated that it was willing to acquire 100% of Arm's equity from SoftBank for nearly US$40 billion. The payment method was Nvidia common stock plus US$12 billion in cash.
The founder of NVIDIA is Chinese-American Jensen Huang. He was born in 1963. In his public appearances in recent years, he always likes to wear an iconic black leather jacket. He immigrated to the United States with his parents when he was a child, while Son, who was born in 1957, went to California when he was 16 years old. Huang Renxun's English is fluent and faster than Son's.
They once met at Sun Zhengyi’s 9-acre estate in Woodside, California. Sun Zhengyi complimented Huang Renxun “
In 2020, Nvidia's GPUs have been extended to a wide range of applications. The GPU it produces is different from Intel's. The latter integrates the GPU on the CPU and is mainly used for PC computers. However, Nvidia produces a separate graphics card that is not integrated with the CPU and was originally used to accelerate computer games. However, in 2016, Huang Renxun came into contact with a company called OpenAI. Its founder claimed that Nvidia graphics cards could be used for neural network training. Huang Renxun personally sent a discrete graphics card to the OpenAI office and watched them use the ImageNet database for artificial intelligence training.
After getting inspiration from OpenAI, Huang Renxun returned to NVIDIA and promoted the graphics card business to the data center. It’s clear that more people in the world will use “gaming graphics cards” like OpenAI. This further expands NVIDIA's customer network.
Despite this, Nvidia still has less access to chip designers than Arm. When talking to Sun Zhengyi, the two mentioned the application of artificial intelligence in various fields such as the Internet of Things, edge computing, automobiles, and cloud. Of course, this premise is that more chip designers must design chips with new functions. Nvidia hopes to gain access to the latest inventions and most innovative companies in the industry by acquiring Arm.
However, because Nvidia is so huge and Arm plays a key role in some fields, there are calls for "anti-monopoly" in the market. Competing companies, including Google, Microsoft, and Qualcomm, have publicly opposed Nvidia's acquisition of Arm, claiming that the transaction will endanger Arm's independence and may harm competition.
In addition, the United Kingdom, the European Union, the United States, and China, as the four major markets for Nvidia and Arm, have also intervened in the supervision of this transaction. Among them, British Minister of Digital and Culture Nadine Dorries led the British Competition and Markets Authority to conduct multiple rounds of in-depth investigations, focusing on the two issues of antitrust competition and national security. The relevant investigations were originally planned to end in May 2022. The U.S. Federal Trade Commission filed a lawsuit to block the deal on antitrust grounds in December 2021. The European Commission, the EU's executive agency, also announced in October 2021 an in-depth investigation into the transaction.
On January 10, 2022, Nvidia and Arm submitted a 28-page written document to the British Competition and Markets Authority in response to many regulatory issues. Nvidia and Arm say market opponents have "romanticized" Arm's history while ignoring the company's current financial situation and exaggerating Arm's current market power. Regarding "antitrust", Nvidia and Arm countered that "this theory cannot withstand scrutiny." Market competitors are worried that after Nvidia acquires Arm, it will "close the door" to competitors, but Nvidia and Arm said: "This will immediately reduce Arm's licensing revenue, thus immediately damaging Nvidia's investment interests. No rational listed entity will accept this self-defeating strategy."
In the 18 months since the acquisition was launched, Nvidia's stock has continued to surge. Although it is far smaller than technology giants like Apple and Microsoft, Nvidia ranks first in the chip industry. If calculated based on the closing price of U.S. stocks on February 7, 2020, Nvidia's market value is US$618.2 billion, which is equivalent to three times that of Intel, the veteran chip designer. Nvidia's offer to SoftBank is US$12 billion in cash plus a portion of Nvidia stock, which also means that the acquisition price has increased from US$40 billion 18 months ago to US$60 billion.
Although Nvidia and Arm argue hard, their confidence is becoming weaker and weaker under complex supervision and continued pressure from peer public opinion.
On February 8, 2022, Nvidia and SoftBank jointly issued a statement deciding to terminate the transaction to acquire Arm. Nvidia previously paid a non-redeemable deposit of US$1.25 billion, but it was helplessly wasted.
In public events, Jen-Hsun Huang always likes to wear his iconic leather jacket. Image source: NVIDIA official
On October 18, 2022, Arm CEO Rene Haas announced an update to the business unit’s organizational structure.
In 2022, which is more than half of the year, Arm, which has ended its sales plan, has regrouped. The company changed its CEO, then replaced key management positions such as its chief financial officer and chief legal counsel, and laid off about one-sixth of its employees (about 1,000 people). Is adjusting the business structure the last step now? How will all this affect future listing valuations?
This structural reorganization of Arm mainly splits the original automotive and IoT business units into two, and at the same time adjusts the positions of the relevant persons in charge.
The future head of the automotive business unit will be DiptiVachani. This is a female leader who has worked in the Intel Internet of Things Group, Texas Instruments, and is now a member of the Global Semiconductor Alliance’s Women’s Leadership Council.
The heads of the other three major business divisions have undergone some kind of "job transfer". For example, Paul Williamson, who was originally in charge of terminals, is now in charge of the Internet of Things department, Chris Bergey, who was originally in charge of server products, is now in charge of the terminal department, and Mohamed Awad, who was originally in charge of the Internet of Things, is now in charge of the infrastructure department.
Prior to this, Arm made frequent executive changes. In September, the company added two new directors and replaced its chief financial officer. Members from America Online (AOL) and TheRaineGroup have joined Arm’s board of directors, apparently in preparation for Arm’s re-public listing. In addition, an "airborne" recruit, Jason Child from Splunk, replaced Inder Singh as chief financial officer in November. His experience in assisting with IPOs may be Arm's main focus.
Even the CEO is "new". The 61-year-old Rene Haas is over 1.9 meters tall. In February 2022, when Nvidia failed to acquire Arm, he replaced Simon Segars as CEO. He was also the first American to hold such a high position in Arm. He grew up in a suburb of Rochester, New York.
Why did Rene Haas become the CEO who led Arm to go public again? This is probably related to his two experiences. In the first period, Haas had 7 years of working experience at NVIDIA and served as the general manager of the computing products department. In the second paragraph, after Haas joined Arm in 2013, he was sent to work in Shanghai and was familiar with Arm’s most important market in the future. Before becoming CEO, one of Haas's important contributions to Arm was to expand its partner network. Alibaba, Ampere, Amazon Cloud Technology, Germany's Bosch, Intel's autonomous driving research and development company Mobileye, etc., all have tighter ties with Arm.
Regarding the adjustment of the organizational structure of the above-mentioned business units, Rene Haas said
With a series of actions, how will Arm, which is preparing for its IPO, package itself? This also raises a big question mark. Previously, SoftBank used the "Internet of Things" as a selling point, but the concept of the Internet of Things is already a bit outdated. The latest emerging self-driving and smart cars were originally gaining momentum, but their temperatures have cooled down a bit too quickly.
Take Intel's Mobileye as an example. The company updated its listing documents on October 18, 2022, showing that the latest target valuation is less than US$16 billion. A year ago, the company was valued at $50 billion. The company delivers "black box" solutions in the fields of autonomous driving and ADAS, and its competitors include software and hardware developers.
Half a year later, on May 1, 2023, Arm officially announced that it had submitted Form F-1 to the U.S. Securities and Exchange Commission regarding the initial public offering of American depositary shares representing its common shares. Relevant financial statements, business plans and risk factors have not been disclosed, which shows that Arm is not fully prepared.
What is it waiting for? What should be waiting for is the opportunity.
In November 2022, SoftBank Group held another financial report conference. At this meeting, Sun Zhengyi conducted a power transfer, but more importantly, he waved the flag for Arm’s upcoming listing.
SoftBank Group has a wide range of businesses, and related management work must be very labor-intensive. Since this meeting, day-to-day management has been handed over to several senior executives such as Chief Financial Officer Yoshimitsu Goto, while Son himself has to devote himself to Arm’s IPO.
Masayoshi Son said that the “best contribution” that can be made to improving SoftBank’s performance currently is to think about how Arm should develop in the future.
In the early morning of August 22, 2023, Beijing time, Arm’s prospectus “came out after a long wait.”
The opportunity Arm is waiting for is exactly the trend of AI.
For its IPO, Arm emphasized its forward-looking outlook on the next era of technology: artificial intelligence. “The CPU is very critical in the AI system because it is either solely responsible for the AI workload or runs AI in conjunction with the GPU (Graphics Processing Unit) or NPU (Neural Processing Unit),” reads the prospectus.
Starting in 2023, generative artificial intelligence will become the focus of technological infrastructure. Arm emphasized:
Regarding the role of CPU in artificial intelligence, Xinmo Research Analyst Zou Zongjun further explained to Southern Financial All-Media reporters. He said: "If you simulate human thinking and intelligent behavior, the CPU is good at complex calculations with steps and data, while the GPU is good at simple calculations with large amounts of data in parallel." Therefore, he pointed out: "Arm's architecture is currently mainly used on the CPU, and currently plays an auxiliary role in managing data processing and transmission functions." This shows that the CPU needs to continue to improve its contribution in future artificial intelligence.
Artificial intelligence has given Arm a fulcrum, and it wants to move the larger earth. Based on the above market goals, Arm announced that it expects their "total addressable market" to reach US$246.6 billion in 2025. In 2022, 48.9% of the value in the addressable market will be created by Arm-based chip designs, while Arm charges a 1.7% licensing fee to chip designers. "The cost and complexity of chip design will continue to rise, and our contribution will continue to increase." Arm said.
Arm is considered the world's largest IPO in 2023, both in terms of listing valuation and fundraising scale.
On September 5, Arm announced the IPO price and cornerstone investor details. It plans to issue 95.5 million ADSs, with the price range expected to be US$47 to US$51 per ADS. This means that Arm will raise US$4.4885 billion to US$4.8705 billion through this IPO, and Arm’s overall valuation is between US$47.8 billion and US$54.5 billion.
In the history of the U.S. stock market, Arm may create the highest listed market value. In 2014, Alibaba’s initial market value when listed on the New York Stock Exchange was as high as US$169.4 billion. Subsequently, Facebook, Uber, AT&T, Rivian, Didi, UPS, Coupang, Kraft Foods, etc. have all created a listed market value of more than US$50 billion.
In terms of fundraising scale, Arm ranks slightly behind. Alibaba raised US$21.77 billion, followed by Visa, Facebook, General Motors, Deutsche Telekom, Rivian, AT&T, etc., all of which raised more than US$10 billion. In recent years, Uber, which went public in 2019, raised US$8.1 billion, and Coupang and Didi, which went public in 2021, also raised about US$4.5 billion.
Arm means "arm" in English. The positioning of the company named after this is not ostentatious, but it is also very consistent with its functional role. For some technology companies, Arm is as indispensable as an arm.
TSMC's move to subscribe for Arm's IPO reflects its need for such a "right-hand man."
On September 12, TSMC held an interim board of directors and approved the subscription of Arm common shares for no more than US$100 million. This move may seem a little strange at first.
This is because the vast majority of TSMC's business is wafer manufacturing. About ten years ago, TSMC invested 838 million euros in ASML of the Netherlands, hoping that ASML would do its best to develop lithography machines. By then, TSMC using advanced lithography machines would be able to leave other competitors behind. Such a major investment should occur between customers and suppliers.
In traditional perception, the relationship between TSMC and ASML is just like the relationship between Arm and chip designers. However, TSMC skipped chip designers and established a relationship with Arm, which shows that some major changes have quietly occurred in the chip industry chain.
TSMC Chairman Liu Deyin said:
But according to the analysis of Tianfeng International Securities analyst Ming-Chi Kuo, TSMC may feel a crisis because its old "rival" Intel has begun cooperation with Arm.
In April 2023, Arm disclosed to the outside world the news of joining hands with Intel's foundry services department, which fueled rumors that Arm would "stop making cores." According to disclosures from both companies, the two aim to enable chip design companies to use Intel's 18A process technology (equivalent to TSMC's 2nm) to develop low-power computing system-on-chip (SoC).
This will compete with TSMC. According to the plan, starting in 2024, TSMC will mass produce wafers containing 2nm transistors. If Intel catches up, it will undoubtedly compete with it for the market cake.
As the size of transistors shrinks again, manufacturing companies such as TSMC and Intel must become as familiar with the business of chip designers as possible, and even come up with their own design solutions when necessary to bridge the gap between customers and manufacturing.
This means that Arm’s circle of friends will further expand in the future.
Still, Arm has competitors. On the list of cornerstone investors for this IPO, mobile phone SoC chip maker Qualcomm did not appear. Although Qualcomm’s management stated in 2022 that it would participate in Arm’s future IPO, in the following year, the legal battle between the company and Arm escalated, which not only changed investment intentions, but also brought unpredictable changes to future supplier relationships.
As early as the first half of 2022, Qualcomm CEO An Meng stated to the media that he hopes to participate in Arm’s future IPO and does not rule out forming a consortium to acquire Arm.
However, in this prospectus, Arm once again emphasized that the legal dispute with Qualcomm has not yet been resolved.
In the second half of 2022, Arm and Qualcomm disclosed a dispute over patent usage rights in the U.S. District Court of Delaware. Qualcomm spent $1.4 billion to acquire CPU designer NuVia, which is the focus of this dispute.
In fact, more than 99% of the world's mobile phones use Arm-based chips. This reflects the fact that Qualcomm, which occupies the leading position in mobile phone chips, has large-scale transactions with Arm. Today's legal disputes can be described as antagonism.
In Arm's indictment, Arm described the different contract contents between itself, Qualcomm and NuVia. In summary, Arm was dissatisfied with Qualcomm's "borrowing" NuVia to use the Arm architecture.
Arm has made many demands in this regard, such as requiring Qualcomm to incorporate NuVia's royalties into Qualcomm's existing licenses and restricting the ability of Qualcomm employees to engage in custom CPU design work. Arm proposed the need to revisit transfer fees related to CPU designs and sign separate licensing agreements for IP and software tools.
However, in its counterattack, Qualcomm accused Arm of being extreme and believed that Arm threatened the innovation of all customers in the industry. Qualcomm also accused Arm of using some bad negotiation tactics, such as deliberately delaying action, resulting in Qualcomm paying a higher price. At that time, it had been more than a year since Qualcomm acquired NuVia. During this period, Qualcomm also spent a lot of engineering efforts and hundreds of millions of dollars to further develop and integrate related core technologies, and had already applied them to specific SoC products.
On September 13, Apple ushered in the most watched new product launch of the year. There are still more than three months until Christmas and New Year. At this time, the new iPhone is launched on the market with the purpose of letting it seize the "gift season".
In the entire series of products released this time, Apple uses its own designed chips. The one installed in the iPhone 15 Pro series is A17 Pro; the iPhone 15 series is equipped with A16; and the new ninth-generation Apple Watch is equipped with S9 SiP.
The above-mentioned chips are also considered to be the most advanced among similar products in the industry. However, when the iPhone first appeared, Apple was still relying on external designers such as Intel and Qualcomm and had no chip research and development capabilities of its own. The making of “Apple Silicon” is also related to Arm.
Although Arm has more than 260 friends, Apple has brought its products to many important technology platforms in the 21st century.
On October 23, 2001, the first-generation iPod came out, bringing Apple back to life. In early June 2007, Apple released the revolutionary product iPhone, and the mobile Internet reached the dawn of dawn. This meant that mobile phones were "intelligent", and it also meant that mobile phones needed data processors such as CPU and GPU just like computers. Five months later, Google launched the first version of the open source Android operating system, and Qualcomm launched the first Snapdragon processor, Snapdragon S1.
It is worth noting that the iPod, iPhone, and Snapdragon S1 are all designed on Arm's architecture.
The beginning of the "iPhone era" means the popularity of mobile electronic devices, which also leads to the "exposed feet" of Intel's x86 architecture. On mobile devices, consumers’ new demands are low power consumption, power saving, and long battery life. This is precisely the shortcomings of the x86 architecture and the strengths of the Arm architecture.
The Arm architecture subsequently became further popular in mobile phone SoC system-on-chips. But despite this, it still can't compete with Intel in computer products.
However, mobile devices are becoming increasingly powerful in data processing. In 2008, MacBook Air came out; in 2010, iPad came out. On these "epoch-making" devices, Arm chips are once again recognized by the chip design industry.
Not only that, Apple also quietly established "Apple Silicon", which means that it has transformed its business, consolidated its strength in the chip supply chain, taken back the ability to develop chips from outsourcers, and established its own competitiveness. Although Intel and Samsung once provided Apple with core processors for a series of products such as Mac, iPod Touch, iPhone 3GS, and iPad, Apple is gradually getting rid of their constraints.
The chip architecture provided by Arm is the cornerstone of the establishment of "Apple Silicon". In 2010, when the iPad came out, Apple used its self-developed A4 chip for the first time; in 2016, Apple's first-generation wireless headphones AirPods were equipped with its self-developed W1 chip; in September 2017, Apple launched its first self-developed AI bionic chip A11Bionic for the iPhone; in March 2019, Apple's new AirPods released after three years used the new H1 chip to enhance the wireless connection performance. performance and battery life; in June 2020, Apple announced that it would introduce self-developed Arm architecture chips into Mac products, and the transition period from Intel chips to Apple's self-developed chips is expected to be two years; in March 2022, Apple announced that its host MacStudio will use the M1 series flagship chip M1 Ultra; in June 2023, MacPro will be equipped with M2Pro and M2Max, and Apple's entire line of Mac products will use self-developed chips.
More people are looking forward to building the next iPhone moment.
The chip war is full of smoke. Who doesn’t want to master the “martial arts secrets” of chip design? “Apple Silicon” has further enhanced Arm’s reputation.
Other technology giants have realized that even if they do not rely on CPU designers such as AMD and Intel or mobile phone SoC giants such as MediaTek and Qualcomm, they can also carry out self-research on CPU, GPU, and SoC based on Arm.
In 2019, Arm launched the first-generation NeoverseN1 processor, which led some Internet companies and cloud service providers to start establishing chip businesses. For a long time, the x86 architecture has occupied the mainstream of the data center server market, with a market share of more than 90%, and this pattern has changed.
For example, in 2018, Amazon launched Graviton, a self-developed server chip based on Arm architecture for the first time, reducing energy consumption for some workloads to 45%; Graviton2 was launched at the end of 2019, which will improve the price/performance ratio for various workloads by 40%; Graviton3 was launched in December 2021, saving up to 60% of energy consumption. Under the tide, Alibaba's chip R&D department Pingtou Ge, Google Cloud, Fujitsu, Marvell, Phytium, Nvidia and other manufacturers have also launched Arm architecture server chips.
In the previous technology waves, Arm won some battles, but it still faced brutal competition. The history of technological development will not stop, and Arm needs to continue to capture the next generation of technological products.
Currently, the company has achieved varying market shares in different product lines.
In the mobile phone market, Arm can be called the "winner". More than 99% of the world's mobile phone processor chips are designed based on the Arm architecture; in the cloud computing market, its advantages have also continued to rise in recent years. The market share of Arm-based processors, DPU and other chips has reached approximately 10.1% in 2022; in the emerging field of autonomous driving, Arm has a fierce offensive, and its market share has reached 40.8%.
Taking the cloud computing market, which has yet to form an absolute advantage, as an example, the Arm architecture is not a tool that all chip designers rely on. The graphics processing unit (GPU) designed by Nvidia in the United States has taken the lead in becoming the preferred product for large model training in the era of artificial intelligence. It may deliver 550,000 related computing chips this year. The latest model of the H100 chip sells for as much as 25,000 to 30,000 US dollars each. Other types of processors from Arm or other architectures have not yet surpassed Nvidia in the data center and cloud computing fields.
However, Arm claims that its circle of friends includes "more than 260 companies, including the world's largest technology giants and chip giants." These friends have historically produced more than 250 billion chips worldwide. Arm stated in the prospectus that its products, namely ISA (Instruction Set Architecture), CPU and GPU architecture, are used by more than 260 technology companies to produce more than 30 billion chips every year, covering 99% of the world's smartphones, 10% of cloud computing processors and 40.8% of autonomous driving chips.
In the prospectus, Arm also introduced its analysis of market segments and the global market share achieved in 2022. Through this analysis, it is not difficult for the public to see where the company's business is headed in the short term.
Mobile applications. Arm expects the mobile applications processor market to grow from approximately US$29.9 billion in 2022 to approximately US$36 billion in 2025, representing a compound annual growth rate of 6.4%. In addition, Arm will continue to develop modem products for 5G needs, mobile GPU products for mobile games, and additional instructions for Armv9 for AI and ML (machine learning).
The mobile phone market, excluding main application processors, is expected to reach US$17.5 billion in 2025, basically maintaining the same size as in 2022.
In terms of consumer electronics products, such as digital TVs, tablets, laptops, XR headsets and wearable devices, Arm expects the market size to grow from approximately US$46.9 billion in 2022 to approximately US$53.2 billion in 2025, with a compound annual growth rate of 4.3%.
In terms of the Industrial Internet of Things, advanced sensors and intelligent transformation can capture and analyze data in real time, covering a variety of electronic products, such as washing machines, thermostats, digital cameras, drones, sensors, surveillance cameras, manufacturing equipment, robots, motor controllers, and urban infrastructure and building management equipment. Arm expects the industrial IoT and embedded chip market to grow from approximately US$41.5 billion in 2022 to US$50.5 billion in 2025, a compound annual growth rate of 6.7%. Arm's market share in the Internet of Things and embedded chip market has reached 64.5% in 2022.
In terms of network equipment, base station equipment, enterprise Wi-Fi, routers and switches will continue to require chips. IBISWorld predicts that total Internet traffic will grow from 335 exabytes per month in 2022 to 580 exabytes per month in 2025, a compound annual growth rate of 20%, thereby increasing the need to deploy additional network equipment. Arm expects the network equipment chip market to grow from approximately US$17.2 billion in 2022 to approximately US$18.2 billion in 2025, a compound annual growth rate of 1.8%. In 2022, Arm's global market share will be 25.5%.
The cloud computing market includes server chips, DPUs, SmartNICs, etc., and customers include Amazon AWS, Microsoft Azure, Google Cloud, Alibaba Cloud, Baidu, Tencent, etc. Arm expects the cloud computing market to grow from approximately US$17.9 billion in 2022 to approximately US$28.4 billion in 2025, a compound annual growth rate of 16.6%.
As cloud service providers such as Amazon and Alibaba begin to use self-designed Arm chips in their data centers, and other cloud service providers such as Microsoft begin to use Arm products, Arm chips continue to gain market share, and Arm expects its share of the cloud computing market to grow significantly faster than the entire cloud computing market. In 2022, Arm’s market share will be 10.1%.
In the automotive market, IVI, ADAS, engine management, body and chassis control, etc. all require chips. Arm expects the automotive chip market to grow from approximately US$18.8 billion in 2022 to approximately US$29.1 billion in 2025, a compound annual growth rate of 15.7%. Arm said its highest market share in the automotive market is in more technologically advanced functional areas such as IVI and ADAS. In 2022, Arm’s global market share will reach 40.8%. As demand for ADAS, electrification, IVI, and ultimately autonomous driving performance grows, the types of automotive chips will continue to diversify.
In addition, automotive electronics is moving from hardware definition to software-defined architecture and computing, allowing new services and features such as ADAS to be continuously improved through over-the-air updates. Gartner estimates that software-defined cars will account for more than 90% of total production by 2029, up from 3% in 2021.
From 1991 to 2017, global Arm chip delivery reached the first "100 billion pieces"; from 2017 to 2021, the second "100 billion" was also reached. Arm is still building the next “100 billion”.
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