Last week, the world’s largest IPO so far this year was born. SoftBank's chip company Arm's stock price soared 25% that day after it went public on Thursday, with its market value exceeding US$65 billion and its price-to-earnings ratio once as high as 170 times, surpassing Nvidia. Regarding Arm's global market strategic layout after its listing, especially the future development direction of China's business, which the market is highly concerned about, Arm CEO Rene Haas accepted an exclusive video interview with Chinese media including China Business News.
Haas told reporters that Arm went public seven years after being acquired by SoftBank, which is an important moment. "The IPO is a very important day with a lot of significance, but it will not change our global strategy, nor will it change our strategy in China." Haas told China Business News.
He emphasized that 2023 will be completely different from 2016. And the growth in the next 5-10 years is even more worth looking forward to.
He specifically mentioned the importance of the Chinese market to Arm. Haas said: "Arm has entered China since 2006, and I have lived in China for many years. This is a very strong and dynamic market."
Haas said that in the past few years, China's market share has grown at a stable level, especially in the fields of cloud data sensors and automobiles, and Arm's market share growth has been particularly outstanding.
Investors are generally concerned about what Arm’s listing will mean for China’s business. In Haas’s view, this will not change Arm’s positioning in China, and Arm’s China strategy will remain unchanged. "The customers we support now are still the customers we want to support." Haas told reporters, "For the Chinese business, I don't think the IPO means any changes."
Among Arm’s cornerstone investors, there are many technology giants such as Apple, Nvidia, Google, and TSMC. These companies have in-depth cooperative relationships with Arm. When these companies become Arm's strategic investors, what impact will they have on Arm's future chip IP licensing system? Does it mean that it will be more difficult for other companies that are not Arm’s strategic investors to obtain Arm’s most advanced chip IP license?
According to Haas, this is a very important question. When answering reporters, he said: "There is no connection between cornerstone investors and business arrangements. These cornerstone investors are all our large ecosystem partners. Some of them are chip manufacturers, some are software development companies, and some are EDA development companies. They are all key partners in promoting Arm's long-term success and have expressed their recognition of our strategy by becoming our IPO cornerstone investor. But becoming a cornerstone investor does not mean any commercial binding relationship."
In particular, Haas emphasized that these companies becoming Arm's cornerstone investors have nothing to do with business relationships. Nor should the market draw any conclusions from this about Chinese companies being treated differently. "There is no connection between the two." He told China Business News.
On the first day of Arm’s listing, the stock price soared and its market value exceeded US$65 billion, making it the largest IPO in the US stock market in the past two years. Although the company's revenue has not grown in the past year, its price-to-earnings ratio is as high as 170 times based on the diluted market value of the stock price.
Can Arm's growth support such high profit expectations? In this regard, Haas told China Business News that Arm cannot influence market expectations, but he is indeed very satisfied with the opening price, which also benefited from Arm's communication with investors during the road show.
He added that one of the important differences between Arm today and 2016 is that its business is more diversified and the market space will be larger in the future.
"In the past, revenue from mobile may have reached about 65%, but today it is only about 45%. This is a very big change." Haas said, "We have gradually shifted from diversification in the mobile field to growth in the two major areas of cloud computing and automobiles."
He also added that Arm can become bigger and stronger in the mobile field thanks to low-power, efficient, high-performance processors, and a strong software ecosystem, which are very important for all other applications. And as artificial intelligence becomes ubiquitous everywhere, Arm will have more opportunities to grow.