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Arm, Chip Designer Owned by SoftBank, Files for Nasdaq IPO in Tech Slowdown

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Arm Files for Nasdaq Listing, Plans to Go Public

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Arm, the chip designer owned by Japan’s SoftBank, has submitted its application for a Nasdaq listing, positioning itself to go public during a historically slow period for tech IPOs.

The company aims to trade under the ticker symbol “ARM.”

According to the filing, Arm reported $524 million in net income on $2.68 billion in revenue for its fiscal year 2023, which ended in March. This revenue figure was slightly lower than the company’s sales of $2.7 billion in 2022.

Earlier this year, Arm filed confidentially for a listing in the U.S., after previously announcing its intention to go public in the U.S. instead of the U.K., which was seen as a setback for the London Stock Exchange.

Arm is one of the most important chip companies globally. It licenses an instruction set that is used in nearly every mobile chip, as well as in PC and server chips. In recent years, it has expanded its business to include selling complete chip designs, which is more lucrative.

Companies such as Amazon, Alphabet, AMD, Intel, Nvidia, Qualcomm, and Samsung use Arm chips, and Arm’s technology is also incorporated into Apple’s iPhone chips. In fiscal year 2023, Arm’s technology was included in over 30 billion shipped chips. Arm earns fees for every chip that uses its technology.

Initially, SoftBank planned to sell Arm to Nvidia, but the deal faced regulatory challenges due to concerns over competition and national security. SoftBank acquired Arm in 2016 for $32 billion, taking it private.

Arm has not provided a projected share price, so its valuation remains unknown.

A Crucial Player in the Consumer Electronics Industry

Arm, with approximately 6,000 employees, plays a vital role in the world of consumer electronics. It designs the architecture of chips found in 99% of all smartphones, making it a key technology provider to Apple, Google, Qualcomm, and other major companies.

The company was established in 1990 as a joint venture between multiple companies, including Apple, with the goal of creating a low-power processor for battery-powered devices. It went public in 1998 before being taken private by SoftBank in 2016.

However, Arm is currently facing challenges due to a slowdown in smartphone demand, which has impacted chip companies across the industry. According to SoftBank’s earnings release, Arm’s net sales declined by 4.6% year-on-year in the second quarter, and the unit reported a loss. SoftBank’s Vision Fund has also suffered significant losses due to unsuccessful tech investments in a high-interest rate environment.

In its filing, Arm emphasized the importance of its technology for AI applications, particularly central processors. While it does not focus on graphics processors necessary for large AI models, Arm stated that the CPU is crucial in all AI systems, either alone or in combination with co-processors like GPUs or NPUs.

Arm identified x86 (used in Intel and AMD processors) and RISC-V (an open-source instruction set supported by major tech companies) as its competitors.

The company revealed that its three largest customers accounted for 44% of its total revenue. Arm China, an independent entity, represented 24% of sales, while Qualcomm, currently facing a licensing violation lawsuit from Arm, accounted for 11% of sales.

Arm is preparing to enter the market at a time when investors are highly interested in next-generation semiconductors driven by artificial intelligence. Nvidia, a leading chipmaker in the generative AI field, has seen its stock price triple this year.

Nevertheless, the tech IPO market has been relatively quiet for the past 20 months, with no significant venture-backed deals since December 2021. In October, Intel spun out self-driving car technology company Mobileye, which has experienced a modest 17% increase in its stock price since its first day of trading.

Some tech investors may view Arm’s offering as an indicator of market demand for new IPOs. Late-stage startups like Instacart are reportedly preparing to submit IPO paperwork to the SEC.

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