ARM's customers - including Apple, Nvidia, AMD, Google, Intel, Mediatek, TSMC, Sunsys Technology and Cadence Design - have agreed to be cornerstone investors in the offering and have expressed interest in buying up to $735 million in ADS, according to the filing.
ARM previously disclosed results show that its 2023 fiscal year revenue of $2.68 billion, net profit of $524 million, revenue and profit are slightly lower than 2022 fiscal year revenue of $2.7 billion and $549 million figures, reflecting the 2023 financial year of the semiconductor industry in the downward period, the industry demand is low status quo.
This is the second time in ARM's history that the company has gone public. Founded in 1990, ARM's main business is to sell "design blueprints" for chip design companies, or IP (intellectual property). From 1998 to 2016, ARM was publicly listed on the London Stock Exchange and the Nasdaq stock Market. In September 2016, Japan's SoftBank Group bought ARM for $32 billion and took it private. In 2020, SoftBank tried to sell ARM to Nvidia for $40 billion, but the deal faced resistance from regulators and the semiconductor industry, and the acquisition failed in February 2022, and SoftBank subsequently sought to push ARM to go public.
Nvidia and other giants as major investors
Chip designer ARM said in a filing on Tuesday that Apple, Google parent Alphabet, Nvidia and other technology companies are interested in buying shares in its Nasdaq listing for a total of up to $735 million.
Photo: Screenshot
Those investments may not happen, but the companies' consideration underscores the importance of ARM, whose designs are used in processors for data center servers, consumer devices and industrial products.
Chip contract manufacturers Intel, Samsung and TSMC are also interested in investing alongside the three trillion-dollar tech companies, in addition to AMD and Mediatek, which manufacture chip designs based on ARM's architecture, have also expressed interest, according to an amended prospectus for ARM's share offering. As part of the deal, ARM could receive a market value of $52 billion and nearly $5 billion in cash.
Initial public offerings in the technology sector have been rare in the past two years, as higher interest rates have made investors reluctant to bet on riskier, high-growth companies. ARM, founded in 1990, is different. It was listed in London and New York before being acquired by SoftBank for $32 billion in 2016. It made $675 million in revenue and $105 million in profit in the second quarter.
In 2020, Nvidia announced plans to buy ARM from SoftBank for $40 billion, but faced opposition from regulators in the United States and Britain. The two companies abandoned the deal in 2022, paving the way for ARM's current IPO in the United States. Nvidia has introduced its own ARM-based chips that work with its own graphics processing units.
Nvidia's failure to buy ARM didn't stop Nvidia co-founder and CEO Jen-Hsun Huang from heaping praise on ARM.
"ARM is an extraordinary company, and the world knows how much I love this company, this platform, this brand and this world-class management team," Huang said, wearing his trademark leather jacket in a pre-recorded video of the roadshow.
Nvidia is working with ARM to develop a new cloud data center ecosystem, Huang said. Historically, Intel chips have dominated data center servers.
Huang isn't ARM's only outside promoter. CAI Lixing, vice chairman and CEO of Mediatek, also appeared at ARM's virtual roadshow, saying that there will be more products combining the two companies' products in the future.
A quarter of the company's revenue comes from China
What is holding up such a high valuation for ARM? In the prospectus, ARM positions itself as a leader in the CPU industry, and its main business is to design, develop and license high-performance, low-cost, energy-efficient CPU products and related technologies, which is also its foundation. More than 260 companies reported that they shipped ARM-based chips in the last fiscal year, including global giants such as Amazon, Google parent Alphabet, AMD, Intel, Nvidia, Qualcomm, and Samsung Electronics.
Although ARM employs fewer than 6,000 people, its status is undeniable. The prospectus reveals that ARM has shipped more than 250 billion chips since its inception, running the vast majority of the world's software, from small smartwatches, smartphones, tablets and personal computers to large drones, industrial robots, data center and network equipment, vehicle operating systems and applications.
ARM estimates that about 70 percent of the world's population uses ARM-based products. In fiscal year 2023 alone, ending March 31, 2023, ARM chip shipments exceeded 30.583 billion, an increase of about 70% over shipments in fiscal year 2016.
It is worth mentioning that China is ARM's largest market, and the documents show that in the fiscal years 2021, 2022 and 2023, ARM's revenue from the Chinese mainland accounted for about 21%, 18% and 25% of its total revenue respectively. ARM China, a Chinese company, is ARM's biggest customer. In fiscal year 2022 and fiscal year 2023, Arm Technology accounted for 18% and 24% of its total revenue, respectively. ARM's equivalent revenue in China comes almost entirely from Arm Technology.
ARM Technology was founded in 2018, the first joint venture company of ARM in China, and is also the main commercial distribution channel for ARM to authorize its IP to authorized customers in China, including many domestic chip companies such as Unigroup Zhanrui. ARM and the actual controller of ARM technology Wu Xiongang have contradictions, once unable to reach a stalemate, after a long game, Wu Xiongang finally out.
Looking at the moment, the fanatical AI market has become a booster for ARM to accelerate its IPO. GPU overlord Nvidia is the most typical case, this year's stock price has soared more than 200%, the market value has increased by about $800 billion, the latest market value of up to $1.16 trillion, firmly sitting on the world's highest market value semiconductor company throne, all from the explosion of AI large model.
In early April this year, Tesla CEO Musk created a large AI model company X.AI, and decisively bought 10,000 Gpus, he was more surprising, exclaiming that "even dogs are robbing Gpus." While the comparison may not be appropriate, it is a vivid portrayal of the current AI market.
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