Why does Softbank sun Zhengyi still want to sell arm? Knowing materials

As a star company in the semiconductor industry, arm has been in frequent incidents recently. First, the CEO of arm in China changed his command a while ago, and now arm’s acquisition case has made a comeback. < / P > < p > there have been reports that Softbank will sell all of arm or push arm to be listed again through IPO. Today, sun Zhengyi, chairman of Softbank group, revealed at an online press conference that the sale of some or all of the shares held by arm, a subsidiary of the British semiconductor development giant, is one of the options under consideration and discussion at present, and the possibility of listing arm next year or the following year is not ruled out. The target of the negotiation has not been disclosed. However, it is undeniable that arm is indeed a key player in the global technology industry, and more than 95% of the world’s smart phones and tablets adopt arm architecture. At present, arm has more than 1000 processor licensing partners, 320 processor optimization package and physical IP package licensing partners, and 15 architecture and instruction set licensing enterprises in the world. With the support of many authorized enterprises, the shipment volume of ARM processor in 2015 reached 15 billion, and the total historical shipment exceeded 100 billion. From a small company founded in 1990, arm has developed into a key company in today’s semiconductor industry. It can be said that it is the result of favorable timing, favorable location, people and common efforts, among which there are many valuable people to help. It was the help of these “dignitaries” that helped arm grow at that stage. Combing the history of arm can also restore the company’s growth history to a certain extent. It is no accident that these “noble people” helped. In fact, it is still a story of competition and cooperation between semiconductor and 3C industry, and love and hatred. In the industry dominated by Moore’s law, there are no permanent friends, but there may be eternal interests. Arm was founded in 1990 as a joint venture between apple, acorn computer company and VLSI technology. < p > < p > in the late 1980s, Apple was looking for a suitable mobile processor for its PDA, which was later known around the world as Newton. VLSI was Apple’s OEM partner at that time. VLSI helped Apple find acorn, a PC manufacturer. Acorn had developed a processor of its own. They named this processor acorn RISC Machine or arm, and Apple’s Newton team proposed to use arm in Newton’s PDA. But at that time, apple wanted to adapt its original ARM processor to Newton’s needs, and acorn didn’t have enough budget to support this adjustment. In 1990, apple, VLSI and acorn reached a cooperation agreement. Acorn company will provide human resources, Apple will provide funds, and VLSI will share the technology of design tools, cooperate in development, and produce as a foundry. On December 27, 1990, acorn teamed up with apple and VLSI to create a new company, Advanced RISC Machine. After that, apple convinced acorn to set up arm, and invested $3 million, accounting for 43% of the shares, and acorn took 43% of the shares. VLSI acquired the remaining shares and became the semiconductor OEM of arm. In fact, VLSI also became the first chip manufacturer to obtain arm license. There is no fund for R & D of < arm P > from apple in those years. < / P > < p > Apple’s investment arm division continues to pay huge dividends, as well as portable devices such as iPods, iPhones and iPads. After < / P > < p >, Apple’s iPods, routers, airports and smartphones, such as iPhones, all use ARM processors. < / P > < p > in product research and development, it is no longer making Intel CISC instructions which are popular in the computer field, but developing RISC simplified instructions which are not favored by the market. Because of the shortage of funds, arm did not have the money to do the follow-up production of chips. Therefore, Robin saxoby, the CEO of arm at that time, creatively proposed the unprecedented business model of IP licensing: that is, arm no longer produces and sells chips, but only designs the CPU, and then authorizes the design to other chip design companies, and the company that has obtained the arm design authorization will be in arm Based on the CPU, peripheral devices are added to design chips with different characteristics. Arm first charges a one-time authorization fee. When chips designed by chip companies are sold on the market, arm then collects royalty Commission according to the sales volume. < / P > < p > this product positioning and business model, in the era of personal computers and high-performance processors, did not have any outstanding advantages. Until 1993, Nokia, the mobile phone giant at that time, found Ti and hoped that Ti could customize a chip for their next generation of mobile phones. Ti recommended the chip based on ARM7 architecture, but it was opposed by Nokia because the 32-bit instruction set of arm occupied too much memory space. This mobile phone needs to be designed with fashionable UI Interface, and ready to carry several popular games – very demanding memory requirements. < / P > < p > in order to meet the requirement of reducing the memory of Nokia, arm has developed a 16 bit thumb instruction set based on 32-bit arm instruction set. Under the condition of little performance degradation, the memory occupied by each instruction is reduced from four bytes to two bytes. This new architecture is ARM7TDMI. < p > < p > Ti designed Mad2 chip based on ARM7TDMI, which was finally adopted by Nokia 6110. Nokia 6110 has become the first GSM mobile phone with ARM processor. It was released in 1997 and has been a great success since it came into the market. It has become one of the classic designs in mobile phone history. Arm is also through the 6110 mobile phone cooperation with Nokia to achieve the first profit, out of the financial crisis. < / P > < p > at the same time, the success of Nokia 6110 has made more mobile phone manufacturers start to use TI chips, and arm has been paid more and more attention by chip design companies. < / P > < p > it must be said that Nokia is one of the important people of arm. Since then, Qualcomm, Freescale and dec have successively joined arm’s licensing camp. ARM7 was finally authorized to nearly 170 companies, becoming the standard processor on mobile phones, telephones, set-top boxes and other devices at that time. It was the first processor core with great success in arm history. < p > < p > since 1997, Microsoft and arm have been working together on embedded, consumer and mobile software and devices, enabling many companies to launch diversified products with arm as the core. In the early years, Lu Hongxiang, President of arm in Taiwan, claimed at a press conference that arm had been working closely with Microsoft in the development of processor architecture. < p > < p > with the gradual decline of the traditional PC era, the tablet PC market of smart phones is growing day by day. In 2011, Microsoft announced that Windows 8 would support arm architecture, and the previously unbreakable Wintel alliance began to crack, which made Intel’s x86 processor market position begin to shake. According to some data, as of 2015, 1384 mobile chip manufacturers in the world have adopted arm architecture. More than 85% of the chips of smart phones and tablets in the world use arm architecture processors, and more than 70% of smart TVs also use ARM processors. By 2016, Intel shut down its atom production line due to huge losses, and the historical shipment of arm chips reached 100 billion. In 2016, Softbank of Japan acquired arm for 23.4 billion pounds. This is also the foreshadowing of today’s arm puzzle. < / P > < p > the industry speculates that the weak growth of arm and the financial crisis of Softbank itself may be an important reason for Softbank to sell arm now. < / P > < p > according to Softbank’s financial report, arm’s revenue source mainly includes two parts: one is the initial licensing fee for IP licensing, including arm architecture and arm IP; the other is to extract royalty based on the selling price of each chip. < / P > < p > on the surface, the financial data of arm after Softbank acquisition continued to rise. According to the financial report released by Softbank, from 2016 to 2019, the total revenue of arm is still at a normal level, which is about $1.8 billion from 2016 to 2019. Among them, revenue from software and services and licensing increased by 51.6% in 2018 and 23% in 2019, reaching nearly $200 million in revenue. < / P > < p > dismantling the specific annual revenue shows the weakness of arm growth. After being acquired by Softbank, arm’s revenue in 2017-2019 will be $1.831 billion, US $1.836 billion and US $1.898 billion respectively. Among them, the revenue of arm began to decline from 2018, and the rate of revenue related to semiconductor business began to decline. In 2018 and 2019, arm’s net sales increased by 0.3% and 3.4% respectively. In 2018, arm’s patent licensing revenue decreased by 11.5%, and the patent licensing revenue in 2019 did not exceed $600 million. < / P > < p > high technology investment also affects arm’s profit to a certain extent. In 2019, arm’s R & D investment is more than $700 million, accounting for about 40% of the total revenue, including the recruitment of a large number of employees and investment in the development of new technologies. Of course, this also makes arm’s net profit continue to decline after 2017. In 2015, arm’s profit was $843 million, and in 2019, arm’s net profit was only $276 million. At the same time, Softbank itself is experiencing financial problems. According to the financial report of Softbank in 2019, the operating loss of Softbank in 2019 is as high as 1.36 trillion yen, a record low. The net loss attributable to shareholders of Softbank parent company is 961.576 billion yen, and the net profit of last year is 1.4112 trillion yen. At the same time, many companies invested heavily in Softbank are facing greater difficulties. Uber’s share price has been falling one after another, the valuation of Wework has plummeted, and even dozens of companies are facing bankruptcy. < p > < p > Apple and Samsung were considered to be two potential acquirers in the rumor when it came out that Softbank was going to sell arm. After that, it was reported that NVIDIA was in substantive negotiations with Softbank, with a transaction value of more than $32 billion. According to Japanese media reports, TSMC and Foxconn have also expressed great interest in acquiring arm. < / P > < p > analyze the buyer in detail. According to an analysis made by Bloomberg, due to the licensing requirements and potential regulatory problems of arm, apple does not intend to acquire the company, because arm’s licensing business is not suitable for Apple’s software and hardware business model; Samsung also said that it has no intention to take over arm, because there are obvious differences between Sanxing and arm in the way of conducting semiconductor business and the company’s business philosophy, And the acquisition of arm will break Samsung’s conventional business processes in the semiconductor field. < / P > < p > in NVIDIA, the ceiling of NVIDIA’s GPU business is gradually emerging. Its financial report in fiscal year 2020 shows that revenue and profit will not increase but fall. Expanding business lines has gradually become a necessity for NVIDIA. Arm’s market share in mainstream mobile device SOC is more than 90%. If arm can be successfully acquired, NVIDIA will make some progress in the mobile market. But the acquisition is likely to lead NVIDIA into an antitrust dilemma. According to sun Zhengyi’s speech this time, the possibility that arm will maintain an independent IPO cannot be ruled out. Mr. Sun said last year that he wanted arm to be listed again within five years. Earlier, arm said it planned to transfer two software businesses to Softbank group, its Japanese parent company, shifting its business strategy to focus on developing its core chip business, and hoped to complete the transfer of the business by September.