[EXCLUSIVE] Samsung mulls buying stakes in Arm

The Korea Times

The Korea Times

Business

Tue, September 26, 2023 | 18:24

Tech

EXCLUSIVESamsung mulls buying stakes in Arm

Posted : 2020-08-03 17:01

Updated : 2020-08-03 18:45

Samsung Electronics Vice Chairman Lee Jae-yong, left, and SoftBank CEO Masayoshi Son, second from right, arrive at the Korea Furniture Museum in Seoul, in this July 4, 2019, file photo, to attend a dinner with the leaders of Korea's conglomerates. / Korea Times file

By Baek Byung-yeul

Samsung Electronics is set to join the acquisition race for the British semiconductor company Arm, which has been put up for sale by its current owner SoftBank, but the Korean tech giant will try to participate in the bid in the form of equity investment, obtaining a small stake in the chip-designing firm, according to a top official in the semiconductor industry here, Monday.

"Samsung Electronics is considering acquiring a small stake in Arm, which will be between 3 percent and 5 percent," said the top industry official, who requested to remain anonymous. "Arm will be acquired by a consortium led by multiple parties from the semiconductor industry given the complex nature of Arm's shareholding structure."

The official also mentioned that Samsung's move in the acquisition race will be similar to that of acquiring equities in Dutch semiconductor equipment maker ASML.

In 2012, Samsung acquired a 3-percent stake in ASML Holdings for 766.4 billion won ($642 million). The Korean tech giant decided to become a stakeholder in the Dutch company as it is the world's largest manufacturer of lithography systems, which are used to print circuit patterns on silicon wafers. ASML is also the only supplier for the extreme ultraviolet (EUV) technology-based lithography equipment, a core product used to produce smaller and more power-efficient chips.

"As seen in Samsung's previous equity purchasing in ASML, Samsung will likely try to acquire equities in Arm. As Samsung could solidify its partnership with ASML after the equity acquisition, Samsung expects it can reduce its licensing fee expenditure by securing equity in Arm," the official added.

Established in 1990, the U.K.-based company Arm is a global leader in mobile chip architecture design that generates profit by licensing its intellectual property to tech giants including Samsung Electronics, Apple and Qualcomm.

Mobile application processor chips are used in most smartphones; Apple's A-series, Samsung's Exynos and Qualcomm's Snapdragon chips are based on Arm's architecture. Every chipmaker using the architecture pays a licensing fee upfront, which depends on the complexity of the design, and the companies additionally pay a royalty for each chip sold.

Its mother company SoftBank is considering either selling Arm or going through with an initial public offering for the chip-designing unit because the Japanese tech giant is strapped for cash after its $100 billion Vision Fund posted losses for two consecutive quarters.

It was rumored that Samsung or other tech giants such as Apple or Nvidia would attempt to acquire Arm as such a move could help them take the upper hand in the semiconductor market.

But Jim Handy, a U.S.-based seasoned semiconductor analyst working for Objective Analysis, said Arm will be merged by a consortium comprised of fabless companies or intelligent system design companies such as Rambus, Cadence and Synopsys. The rationale for that is because these firms are similar to Arm, generating revenue through IP licensing.

Recently, some suggested that Nvidia, a U.S.-based graphics chip maker, would become the sole suitor for Arm, but the top official said it is unlikely because it will be difficult for the graphics chip maker to win approval from the various fair trade commissions in semiconductor powerhouse regions: the U.S., the EU, and East Asia ― Japan, China and Korea.

The official also expressed doubt whether Nvidia has sufficient financial firepower to become an independent acquirer of Arm given SoftBank reportedly wants to sell Arm based on a valuation of over $41 billion.

"Nvidia won't become the sole suitor for Arm as the company needs to win approvals from fair trade authorities in countries that are doing business with the British company. I think it will be difficult for Nvidia to gain approval from any of those authorities," he said.

baekby@koreatimes.co.kr