Haas also mentioned that after the removal of former CEO Wu Xiongang to obtain financial results, Arm’s Chinese joint venture accounted for about 20% of Arm’s total global revenue last year, or about $540 million. “I can say that Arm wouldn’t have done so well last year without the performance of the Chinese joint venture.”
In the hours before the financial report was released, Masayoshi Son, CEO of Japan’s SoftBank Group, the parent company of Arm, announced that when facing SoftBank’s huge loss of US$15.1 billion (about 89.664 billion yuan) in 2021, he hopes to fully promote the Arm IPO and become its future growth point. Earlier, SoftBank said that the Arm IPO could be completed as soon as March 31, 2023, with a valuation expected to reach $60 billion.
“One of the biggest hurdles to the Arm IPO is the governance of the Chinese joint venture. The head of Arm China (Xiongang Wu) is a bit rebellious, the board fired him two years ago, and Wu is still in charge of the business, and it’s not easy to change. But last week, especially the This week, a lot of progress has been made. Two new CEOs have been formally resolved by the board of directors, and one of the new CEOs has been approved by China and completed the industrial and commercial change registration (obtained a new official seal). Great progress has been made.” Masayoshi Son said, As Arm China enters normalized management, SoftBank will conduct a thorough (scrutinize) audit of Arm China in the future to clear the way for Arm’s listing.
Masayoshi Son emphasized that the Arm listing process does not require SoftBank to provide capital expenditures. Even if the capital market situation is not good at that time, Arm’s listing may be delayed for 3 to 6 months, but SoftBank currently has $23 billion in cash and $11 billion in bonds due in the next two years. SoftBank has enough funds to deal with Arm’s listing changes or Stock prices fluctuate.
Smart cars drive IP licensing revenue past $1 billion for first time
95% of the world’s smartcell phoneThe leader of the chip ARM architecture, Arm’s main source of income is the licensing of chip design IP, and the delivery royalties from tracking the number of chips sold using Arm technology, that is, the royalties that Arm draws from each chip.
According to the financial report, of the $2.7 billion in revenue in 2021, Arm’s chip licensing business revenue will increase by 61% to $1.13 billion; chip royalties based on ARM architecture technology sales will increase by 20% to $1.54 billion.
In May 2022, the research institute IPnest released a statistical report on chip design IP. The report shows that in the global IP market in 2021, Arm will rank first, securing its position as the number one IP supplier, with a market share of 40.4%, an increase of 33.7%. The second and third are the US EDA giants Synopsys and Cadence, with a market share of 19.7% and 5.8% respectively.
Arm said that thanks to the need for vehicle electrification and increased computing power, Arm’s IP licensing business exceeded $1 billion in revenue for the first time last year, the best performance in history.In 2021, the shipment of chips based on ARM architecture technology will reach 29.2 billion, and the cumulative shipment so far has exceeded 225 billion.
Arm CEO Rene Haas (Source: Arm official website)
Haas said in the financial report, “Our business performance hit an all-time high, demonstrating unprecedented demand for Arm technology, and the Arm ecosystem is showing more strength than ever. Our computing platform will drive the cloud. The next wave of technological innovations in computing, automotive and autonomous systems, the Internet of Things, the Metaverse, etc. Looking ahead to the future built by Arm technology, it is imperative to continue to implement our business strategy, through the development of product roadmaps and engineering talent Invest more to provide ecosystem partners with the solutions they need and work with them to redefine the future of computing.”
However, with the increasing number of players participating in the RISC-V open source instruction set architecture, Arm is facing new competition, andIntel,appleHowever, RISC-V only accounts for about 1% of the global market share. So Haas said that Arm is continuously investing in research and development, reaching $887 million per year, accounting for 32% of Arm’s total revenue.
Earlier, Nvidia (NASDAQ: NVDA) and SoftBank jointly announced that due to major regulatory hurdles, the two sides will terminate the previous Nvidia acquisition of Arm for $44 billion. Sun Zhengyi said that Arm will start preparing for an independent listing, and transfer Arm China’s equity for auditing financials to complete the IPO by March next year, which is expected to become one of the largest IPOs in the chip industry.(For details, please refer to the previous article of the Titanium Media App:“In order to speed up the listing of Arm company, Sun Zhengyi decided to transfer the equity of Anmou China”)
In an interview with Haas published by Fortune (“Fortune” magazine) on the evening of the 13th, it was disclosed that the biggest problem facing the company now is that once Arm becomes a public company, especially a high-value stock – shareholders may expect revenue and profits. Continued growth. But analysts said that it is not easy for Arm to increase sales or profitability, because IP is only part of the value of chips, especially Arm’s relatively limited pricing power in the industry. So, relative to Intel orAMDWith tens of millions of revenue in the server market, it may take years for Arm to realize a huge return on IP licensing revenue.
Wu Xiongang proposed “administrative reconsideration”, it is not easy for SoftBank to fully control Arm China
As mentioned at the beginning, SoftBank has cleared the obstacles related to Arm’s listing, and one of the important cores is to deal with the governance of Arm’s China joint venture.
Arm China’s joint venture “Amou Technology” is the only authorized platform for Arm technology IP in China. Its partners include Alibaba, UNISOC,HuaweiIt is extremely important to China’s chip semiconductor industry. At present, 51% of the company’s equity is held by Chinese investors, and 49% is held by Arm.
In June 2020, Arm teamed up with SoftBank and other shareholders to try to remove former chairman and CEO Wu Xiongang on the grounds that Wu Xiongang “jeopardized the development of Arm Technology, the company’s shareholders and stakeholders” with a 7:1 board vote ratio. , but Wu Xiongang refused to hand over the company’s official seal, and the recall came to a deadlock.(For details, please refer to the previous article of the Titanium Media App:“Arm China’s Coaching Change Storm | Titanium Media Depth”)
Although SoftBank Group and Arm Corporation announced on April 29 that the new management, Liu Renchen and Chen Xun, the new co-CEOs of Arm Technology, took office, and completed the change of industrial and commercial registration according to law, Liu Renchen is the legal representative. And Haas reiterated after the annual report that Arm has settled a dispute over control of its Chinese joint venture.
However, Titan Media App learned from people familiar with the matter that the dispute has not yet been resolved. Regarding the “unilateral” dismissal of the board of directors, Wu Xiongang is currently resolving the matter through administrative reconsideration and other legal means, and he will not compromise on it for the time being. In the next period of time, Wu Xiongang may continue to fight for control of the company.
Allen Wu, former CEO of Arm China
Wu Xiongang still has two major points of contention:One is that Wu Xiongang still indirectly holds 15% of Arm China’s shares (it is reported that he also secretly spent 202 million US dollars to buy 13.3% of the shares). As a shareholder, he has changed the board of directors through legal forms such as “administrative reconsideration”. The result of unilateral dismissal; the second is that due to the impact of the new crown epidemic, it will take time for Liu Renchen to take over Arm’s Shanghai headquarters in China, and there are still variables in this “coaching change”.
This means that it will not be easy for SoftBank to gain full control of Arm China.
Liu Renchen said at the staff meeting on May 6 that the change of the company’s legal representative and CEO was not a unilateral act of any foreign shareholder. Therefore, the so-called “some foreign shareholders take back the joint venture company” remarks are completely false. . The change of leadership will not affect the positioning and development of Amou Technology as an independent company with a majority stake held by Chinese investors, and will continue to maintain independent development in the future and continue to provide services and support for related industries in China.
In an interview with domestic media, Wu Xiongang said that SoftBank Group is taking over all functional departments of Amou Technology. While the future is unpredictable, he himself will lead the team to continue to do technical work well and serve the industry.
Huge loss of SoftBank: Promoting Arm’s listing and realization, reducing Chinese investment
On May 12, Japan’s SoftBank Group (TSE: 9984) released its fiscal 2021 financial report ending March 31. According to the financial report, SoftBank’s sales revenue last year was 48.5 billion US dollars, a year-on-year increase of 10.5%, but the loss scale was as high as 15.1 billion US dollars, the highest since the company was established. SoftBank shares fell 3.94% on the day.
In fiscal 2021, SoftBank’s losses were mainly due to technology stocks – Alibaba, Didi, South Korean e-commerce company Coupang and Southeast Asian ride-hailing company Grab and other investee companies fell sharply. The SoftBank Vision Fund lost $26.8 billion last year alone. But SoftBank’s telecom business and Arm’s profits are still growing.
Sun Zhengyi, CEO of SoftBank Group (Source: Screenshot from the financial report video conference)
Masayoshi Son said that in response to this situation, SoftBank will enter a defensive mode, continuously monetizing its assets to obtain more cash, while raising investment standards and reducing foreign investment. “In today’s market, nobody knows what’s going to happen tomorrow, so we have to prepare for the worst.”
Then, fully promoting the listing of Arm has become one of the most urgent solutions for Sun Zhengyi.
According to the financial report, 49% of SoftBank Group’s assets in 2021 will come from the Vision Fund, 22% will come from Alibaba stock, 12% will come from Arm, and 10% will come from SoftBank’s telecom business in Japan.
“Since the end of last year, the royalty income of each chip based on ARM technology has begun to rise sharply. From this year to next year, Arm company has a very good revenue growth.” Sun Zhengyi said that Arm company is about to enter the second golden period, At this moment, IPO listing is the most appropriate choice.
Masayoshi Son forced Arm’s executive team to make financial forecasts for the company 10 years from now, which is epic for Arm. “We expect them (Arm) to do better and even higher revenue in the future,” Son said.
For SoftBank Vision Fund’s investment in China,The Vision Fund’s investments in China have cost SoftBank $2 billion in fiscal 2021. Sun Zhengyi said that on the one hand, SoftBank has reduced its investment in China to reduce risks, but SoftBank will not stop investing in China, but the investment scale will be smaller than before.
“China’s influence on SoftBank has been very large in the past two years…I think the part that depends on China will become less and less.” Son said.