Qualcomm eager to invest in Arm alongside rivals in upcoming IPO

The US chipmaker Qualcomm wants to buy a stake in Arm alongside its rivals and create a consortium that would maintain the UK chip designer’s neutrality in the highly competitive semiconductor market.

Japanese conglomerate SoftBank plans to list Arm on the New York Stock Exchange after Nvidia’s $66bn purchase collapsed earlier this year. However, the IPO has sparked concern over the future ownership of the company, given its crucial role in the global technology sector.

“We’re an interested party in investing,” Cristiano Amon, Qualcomm’s chief executive, told the Financial Times. “It’s a very important asset and it’s an asset which is going to be essential to the development of our industry.”

He added that Qualcomm, one of Arm’s biggest customers, could join forces with other chipmakers to buy Arm outright, if the consortium making the purchase was “big enough”. Such a move could settle concerns over the corporate control of Arm after the upcoming IPO.

“You’d need to have many companies participating so they have a net effect that Arm is independent,” he said.

Arm, founded and headquartered in the UK, was listed in London and New York before SoftBank acquired it for £24.6bn in 2016 despite widespread concern about Britain’s most successful tech company falling into foreign hands.

Some UK politicians have called for the government to buy a “golden share” in Arm that would recognise the company’s place as a crucial strategic asset for the nation.

But despite intense British lobbying, SoftBank is thought to be pushing ahead with a US listing, leading to questions over the future control of a company that has long been “the Switzerland” of the $500bn global semiconductor industry. Arm strikes licensing deals with partners regardless of size or geography, which has led to its intellectual property being used in the majority of chips sold worldwide.

Amon’s intervention will give fresh momentum to the idea of a syndicate of chipmakers becoming cornerstone investors in Arm. Intel chief executive Pat Gelsinger suggested that the US chipmaker could support such a move earlier this year.

Qualcomm had opposed Nvidia’s proposed acquisition of Arm, claiming that it made no sense for one chipmaker to take control of a company that was of fundamental value to the entire sector.

“Arm has won everywhere because of the collective investment of the entire ecosystem, from companies like Apple and Qualcomm and many others, and that’s because it was an independent, open architecture that everybody could invest in,” said Amon, referring to the period before SoftBank purchased the company.

With demand for semiconductors set to double over the next 10 years and as the world struggles to recover from a multiyear chip crunch, manufacturers of the technology found in all modern electronics will rely on Arm’s designs more than ever.

“When we look today, I think the trend is that everything is moving to Arm,” said Amon, pointing to the chip IP designer’s recent expansion beyond mobile phones into cars, the internet of things and data centres.

After several years of low returns, Arm reported record annual revenue of $2.7bn in 2021, up 35 per cent from the previous year. Its licensing business revenue grew by close to two-thirds, with royalties increasing by a fifth to $1.5bn.

Amon said Qualcomm had not yet spoken to SoftBank about a potential investment in Arm. He added that the Japanese group had been prioritising resolving an impasse at Arm’s renegade China unit.

Allen Wu, the chief executive of Arm China, has been in effective control of the unit but has fallen out with its UK-based parent company, as well as SoftBank.

However, recent official Chinese records show that Wu has been removed from all of his roles at Arm China, paving the way for Arm’s IPO.

Investing in Arm alongside rivals would “support a successful IPO and valuation” and ensure that the company continued “striving and investing”, said Amon.