SoftBank seeks to form a “strategic alliance” between Arm and Samsung

By Sam Nussey and Joyce Lee

TOKYO/SEOUL -Founder of SoftBank Group Corp and CEO Masayoshi Son said on Thursday he planned to meet with Samsung Electronics to discuss a possible “strategic alliance” between the South Korean tech giant and chip designer Arm.

The billionaire will make his first visit to Seoul in three years. “I would like to speak with Samsung about a strategic alliance with Arm,” Son said in a statement.

The statement follows remarks by Samsung Vice Chairman Jay Y. Lee, who was quoted as saying by newswire News1 that Son “may make a proposal” on a visit scheduled for next month. Samsung declined to comment on the report.

SoftBank acquired Arm, whose technology powers Apple’s iPhone and nearly every other smartphone, in 2016 for $32 billion. A subsequent proposed deal to sell Arm to Nvidia drew industry opposition and ran into regulatory hurdles, prompting SoftBank to outline plans for a U.S. listing of the Cambridge-based company.

The visit comes amid speculation over the potential formation of an industry consortium to invest in Arm and ensure its neutrality.

“There must be someone in the middle who mediates to bring together various companies into a consortium, and Son may be trying to play such a role,” said Lee Min-hee, an analyst at BNK Investment security.

“A potential proposal could be that companies interested in owning part of Arm could enter a pre-Initial Public Offering placement at a lower price in front of a Initial Public Offering next year,” he added.

Monetizing the arm has become a major concern for executives at tech conglomerate SoftBank, which posted a massive loss in its investment arm Vision Fund and sold its stake in Alibaba Group Holding to raise cash.

Efforts to list the chip designer, however, come amid a dramatic drop in trading with volatile markets due to soaring interest rates and Russia’s invasion of Ukraine. The Philadelphia SE Semiconductor index is down about a third since the start of the year.

An alliance with Arm could be a strategic asset for Samsung as the memory chip market leader invests heavily to try to catch up with Taiwan Semiconductor Manufacturing Co in logic chips.

The South Korean conglomerate is still seen as hampered by the technical limitations of the original technology for memoryless chips such as the application processor architecture, in which Arm specializes.

Other possible Arm suitors include Intel Corp, whose chief executive Pat Gelsinger in February expressed interest in joining a consortium to buy the chip designer.

Samsung rival SK Hynix has also expressed interest in Arm, according to Yonhap news agency. He quoted Vice President Park Jung-ho as saying in March that the chipmaker was considering forming a consortium to buy Arm. The company said at the time that the comment did not refer to a specific plan.

Qualcomm Inc, which has also been named as a potential investor, is being sued by Arm, which accuses it of violating licensing and trademark infringement agreements.

Discord could cast a shadow over an Arm listing, Redex Research analyst Kirk Boodry wrote in a note to clients.

“Arm probably needs all of its customers to get a premium valuation,” he said.

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