I am making a special offer to Son Jeong-eun Lee Jae-yong… pressure on ARM investment

Bloomberg “Chairman’s visit to Korea next month”
Acquisition price too high for M&A
An equity investment is likely to be negotiated on the basis of an IPO

Vice Chairman Lee Jae-yong

Samsung Electronics Vice Chairman Lee Jae-yong will meet Japan’s SoftBank Chairman Son Jeong-eui next month. It is expected to continue to negotiate closely with SoftBank’s semiconductor design firm, ARM. The observation that discussions on equity investment will take place on the basis of an initial public offering (IPO) rather than a merger and acquisition (M&A) carries weight.

According to industry sources on the 22nd, Chairman Son will visit Korea next month to meet Vice Chairman Lee and make a ‘special offer’. According to Bloomberg News on the same day, “Chairman Son will visit Korea to discuss the alliance between Samsung Electronics and ARM.” A SoftBank spokesperson also said, “Chairman Son will discuss strategic cooperation between Samsung and ARM.”

Chairman Son Jeong-eui

Chairman Son Jeong-eui

ARM is a global super company that creates the most critical design assets (IP) for semiconductor manufacturing. ARM’s largest shareholder is SoftBank (75% SoftBank, 25% Vision Fund) led by Chairman Son.

The industry believes that Chairman Son is very likely to ask for help with the IPO. It is following an IPO in March next year targeting the New York and London stock markets after Nvidia’s M&A for ARM fell through. It is expected that Samsung Electronics will participate in the pre-IPO for equity dispersion and fund transfer.

ARM is an attractive company, but it is too expensive to acquire immediately. Japan’s SoftBank, which bought ARM for $31.4 billion (about 44 trillion won) in 2016, is pushing for a resale after Nvidia’s failure to sell ARM. The acquisition price increased from $40 billion (about 56 trillion won) to $66 billion (about 93 trillion won).

An industry official said, “Samsung Electronics’ equivalents have earned 125 trillion (as of the second quarter), so there is room to acquire, but there is a question of whether it is worth investing that much money.” many believe that cooperation will be achieved,” he said. According to the estimates of the market research company Statista, ARM sales are about 2.1 trillion won in 2019 and 2.2 trillion won in 2020.

The global semiconductor industry’s resistance to an ‘ARM sale’ is also cited as one of the reasons why M&A is difficult. Qualcomm, Microsoft, and Google in the US raised their voices against Nvidia’s acquisition of ARM. This is due to concerns that some companies will occupy a monopoly position in the semiconductor industry, thereby hindering competition. Most semiconductor companies redesign and manufacture semiconductor chips based on ARM blueprints.

This is the first time in three years since 2019 that Vice Chairman Lee and Chairman Mab have met. At this meeting, in addition to ARM-related cooperation, a wide range of talks on a number of common interests such as artificial intelligence (AI), fifth generation communication (5G), and the battlefield are expected.

Reporter Jung Ji-eun jeong@hankyung.com

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