Leidi.com Lei Jianping September 15
British chip design company Arm Holdings (stock code "ARM") was listed on Nasdaq in the United States yesterday, with an issue price of US$51, which is at the top end of the issuance range of US$47 to US$51.
ARM issued 95.5 million ADS shares in this issuance, raising US$4.87 billion.
AMD, Apple, Cadence Design Systems, Google, Intel, MediaTek, NVIDIA, Samsung Electronics, Synopsys, TSMC and other companies are cornerstone investors and will purchase ARM shares in this IPO, with a maximum subscription of no more than $735 million.
ARM's opening price was US$56.1, an increase of 15.2% from the issue price; the closing price was US$63.59, an increase of 24.69% from the issue price; based on the closing price, the company's market value was US$65.195 billion.
Arm CEO Rene Haas issued an internal letter yesterday, saying that in New York, the United States, and Arm offices around the world, we are celebrating Arm's re-listing and entering a new chapter in building the future of computing.
“Over the past 33 years of the company, Arm’s colleagues, partners and the entire ecosystem have worked together to promote the development of the Arm computing platform. Based on the most widely used CPU architecture in history, we have jointly built the world’s largest computing and software ecosystem. Tie."
Rene Haas said, "The cumulative shipments of Arm-based chips have exceeded 250 billion to date, and Arm CPU has become the 'brain' of various devices. The success we have created together comes from Arm's DNA - it is for batteries that rely on batteries. A high-performance, high-efficiency processor designed to run products.”
U.S. stock IPOs are restarting
In December 2021, software provider HashiCorp and Samsara, which develops cloud technology for industrial companies, went public. Since then, there have been few major technology company IPOs backed by venture capital.
This time, there is a restart phenomenon in US stock IPOs.
In addition to Arm's listing, fresh grocery delivery company Instacart, data and marketing automation company Klaviyo, shoe industry company "ugly shoe" Birkenstock, biopharmaceutical companies RayzeBio, and Neumora Therapeutics have also submitted prospectuses in preparation for listing on the U.S. stock market.
However, in the context of the Federal Reserve's aggressive interest rate hikes, market liquidity has been greatly affected. Whether it is Arm, Instacart or Klaviyo, it is difficult for valuations to reach ideal levels.
Arm has been listed in London and New York. The market value based on the issuance price is US$54.5 billion, which is lower than the 25% stake in Arm acquired by SoftBank from the Vision Fund, which was valued at US$64 billion at the time.
Before the IPO, SoftBank Group beneficially owned 100% of ARM's shares; after the IPO, SoftBank will own 90.6% of the shares. If the green shoe plan is exercised, SoftBank's shareholding will drop to 89.9%.
Even so, this listing has made ARM the largest IPO on the US stock market since 2023, and the largest IPO since Rivian went public in 2021.
The closing price rose sharply by 25%, which also made Arm's market value exceed the valuation when SoftBank acquired Arm from the Vision Fund, giving a boost to the once stagnant US stock IPO.
Annual revenue of US$2.7 billion
Arm is a semiconductor intellectual property (IP) provider and one of the most important companies in the global technology field. 95% of the world's smartphones, including Apple iPhones and Android phones, use the Arm architecture.
Arm's low-power processor design and software platform enable advanced computing on more than 250 billion chips, and its technology securely drives products including sensors, smartphones and even supercomputers.
Arm's fiscal year ends on March 31 of each year. The prospectus shows that Arm’s revenue in fiscal year 2021, fiscal year 2022, and fiscal year 2023 will be US$2.027 billion, US$2.7 billion, and US$2.679 billion respectively; gross profits will be US$1.882 billion, US$2.572 billion, and US$2.573 billion respectively.
Arm's operating profits in fiscal year 2021, fiscal year 2022, and fiscal year 2023 are US$239 million, US$633 million, and US$671 million respectively; net profits are US$388 million, US$549 million, and US$524 million respectively.
Arm's revenue in the second quarter of 2023 was US$692 million, compared with US$675 million in the same period last year; gross profit was US$667 million, compared with US$644 million in the same period last year; operating profit was US$294 million, compared with US$644 million in the same period last year. Operating profit for the same period was US$111 million; net profit was US$225 million, compared with US$105 million for the same period last year.
China is Arm's largest overseas market. In fiscal year 2022 and fiscal year 2023, Arm China (Arm China) accounted for 18% and 24% of Arm's total revenue respectively.
Almost all of ARM's revenue in China comes from ARM China.
In 2020, there was an internal fight in Arm Technology - the board of directors of Arm China's joint venture company, Arm Technology, voted 7:1 in favor of removing Wu Xiong'ang, and Arm Technology's "coaching change drama" kicked off. , In the end, Nvidia's acquisition of Arm ended in failure in 2022. Arm Technology announced that co-CEOs Dr. Liu Renchen and Dr. Chen Xun took over, and the two took over Arm Technology's business operations. Only then did the turmoil come to an end.
Arm CFO specifically mentioned the importance of the Chinese market and its cooperative relationship with Arm China during the roadshow. According to him, the relationship between ARM and Arm China is that ARM provides technology, and Arm China returns 90% of ARM’s profits in China. revenue.
Arm is not in a position to take advantage of AI
AI has been booming since 2023, and NVIDIA is the biggest beneficiary. To some extent, Arm can catch up with NVIDIA. For example, the NVIDIA chip GH200 includes a CPU based on the Arm architecture.
However, some analysts believe that “not all Nvidia GPUs must be sold with Arm CPUs, they just happen to provide super chips that combine the two.”
Arm isn't at the center of the AI craze, either. An analyst said, “What’s exciting about the current wave is software and platforms. OpenAI has launched tools that can use large language models to produce content (AIGC). Arm has nothing to do with this.”
SoftBank is the largest shareholder
SoftBank acquired Arm in 2016 for 24 billion pounds (about 31 billion U.S. dollars).
In 2020, SoftBank had planned to sell ARM to Nvidia for US$40 billion. However, because Arm is the world’s largest smartphone chip IP design supplier, mobile phone chips manufactured by Apple, Qualcomm, Samsung and other companies all use the ARM architecture. The final sale plan fell through due to regulatory objections.
Since 2022, with the collapse of global technology stocks and the depreciation of the yen, the investment returns of SoftBank Vision Fund have deteriorated, especially investments in Wework, encryption startup FTX and other companies have suffered waterloo, which has seriously damaged the image of SoftBank founder Masayoshi Son.
After SoftBank recorded its largest single-quarter loss since the company was founded, its liquidity needs increased and it sold various assets on a large scale. Alibaba has become SoftBank’s “cash machine”.
In 2022, in order to meet liquidity needs, SoftBank Group will sell 9% of Alibaba shares. In February 2023, Alibaba announced that SoftBank's Alibaba shares had fallen below the 15% threshold required to nominate the company's directors, thus losing its seat on Alibaba's board of directors.
Since then, SoftBank has been seeking to promote Arm’s listing. In a sign of Arm's importance to SoftBank's portfolio, SoftBank invited Arm CEO Rene Haas to join its board of directors in April.
With the listing of Arm this time, Masayoshi Son has also made a small turnaround.
The following is an internal letter from Arm CEO Rene Haas:
Today, in New York, USA, and Arm offices around the world, we are celebrating Arm’s re-listing and entering a new chapter in building the future of computing.
Over the past 33 years of the company's history, Arm's colleagues, partners and the entire ecosystem have worked together to promote the development of the Arm computing platform, and I would like to express my heartfelt thanks to you all.
Based on the most widely used CPU architecture in history, we have jointly built the world's largest computing and software ecosystem. Cumulative shipments of Arm-based chips have exceeded 250 billion to date, and Arm CPUs have become the “brains” of various devices. The success we've created together comes from Arm's DNA - high-performance, high-efficiency processors designed for products that run on batteries.
These design principles are the reason why chips based on the Arm architecture have been able to drive more than 99% of the world's smartphones for more than a decade. As every application market requires higher energy efficiency and computing performance at the same time, this makes Arm, which will be relisted publicly in 2023, very different from when SoftBank was privatized in 2016.
In 2017, we shifted from designing general-purpose CPUs for smartphones and consumer devices to designing specialized CPUs for specific markets. Arm's growth is no longer defined solely by the smartphone market. Our business has become more diversified and we have deployed computing platforms that respond to specific market needs in more mobile devices, cloud infrastructure, vehicles and the Internet of Things (IoT).
Today, partners demand Arm more than ever. The time required for the chip manufacturing cycle is increasing, and the speed of product delivery is also accelerating. At the same time, chips are becoming more complex and broken down into smaller chips, which are composed of subsystems of IP modules.
To reduce design time, these subsystems require a fully verified, tested, and "out-of-the-box" computing solution. This is a new growth opportunity for Arm, and we are uniquely positioned to provide computing subsystems for our major application markets. In August this year, the ArmNeoverse computing subsystem we launched implemented this for the first time.
We do everything we can to enable our chip partners to innovate and get to market faster. However, the prerequisite for achieving all this is "having a flourishing software ecosystem." The connection between our CPUs and our software ecosystem is Arm’s true strength. This is also unique in our industry.
Our exceptional software ecosystem provides Arm with unprecedented breadth of software support for any CPU architecture. This is crucial for developers in the era of artificial intelligence (AI). They can confidently write code for the Arm computing platform, knowing that it will run on the Arm platform and that the market will demand it. Artificial intelligence based on Arm architecture is almost everywhere.
As CEO of Arm, what excites me most is the opportunity we have to bring artificial intelligence to everyone and everywhere. Today, Arm technology reaches 70% of the world’s population, putting us in a unique position to advance artificial intelligence across devices. As a listed company, Arm will be in a better position to continue to strengthen our excellent engineering team and invest in more artificial intelligence opportunities.
I would like to once again thank our colleagues and our ecosystem for their contribution to making everything possible today. I understand this is a long road filled with unforeseen twists and turns. But through it all we emerged a stronger and more resilient company.
Arm and its ecosystem have unlimited opportunities. Every object today is already a computer, and in the era of artificial intelligence, the world's computing needs are endless. We will work together to build the future of computing, a future built on Arm.
I’m excited to be a part of Arm and can’t wait to witness the next chapter of our history.
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