How does Arm's path go?

Arm was founded in 1983 by Acorn Computers in the UK. In 1990, a new company called Advanced RISC Machines was established, which became "Arm Limited" when it went public in 1998. It became a hot topic after being acquired by Japan's SoftBank Group in 2016.

On SoftBank's official website, this is how Arm is introduced: Almost all smartphones and tablets use the technology of processor designer Arm. In the era of the Internet of Things (IoT), Arm, a leader in semiconductor technology, is expected to play a central role in SoftBank Group's strategy by leveraging its differentiated technologies in high security and energy efficiency.

In the end of the storm, Arm went from small British company to strength. The current Arm is on the one hand the rise of the market, on the other hand is "scandal-ridden", for the future, where Arm is going has always been the focus of the semiconductor industry.

01 Rise: The Next Revolution in the PC World

The explosion of smartphones also brought the explosion of Arm, the first revolution that Arm started. Now, the Arm architecture is also starting to attack the PC field, hoping to set off the next revolution in the PC world.

According to Counterpoint Research, by the end of 2027, Arm may eventually occupy about 25% of the notebook market. At the same time, as the largest player in the PC market, Intel will suffer the most in the face of competition for Arm solutions, losing nearly 10% of the market share in five years.

apple

Apple launched its own M1 chip for the MacBook series in 2020, which is based on the Arm architecture. It is the advantage of the Arm architecture that is the most prominent among the direct competition features of the M1 MacBook with the same level of computing performance, power management and battery life.

The excellent performance of Apple's Arm architecture PC chips has made many chip companies in the industry also choose Arm. And, according to Counterpoint Research, Apple will lead the Arm notebook market with a 90% share in 2022.

MediaTek

MediaTek has also shown a lot of interest in Arm-based solutions. At the executive summit, MediaTek executives said they see a $40 billion opportunity in the PC market, which MediaTek will join by launching a new Kompanio mobile processor.

Vince Hu, vice president of MediaTek, said that MediaTek plans to move from the "low-power area to the high-power area" and apply it to some of the Arm technology of smartphone chips such as the Dimensity processor series to the PC. He also mentioned "the realization that we have to support higher performance applications, and on the CPU and GPU side, we have to make some larger investments as a foundational capability."

It is worth noting that MediaTek's attack on the PC field is led by Adam King. He was a core member of Intel's Customer Computing business team and was responsible for marketing 4th to 6th generation Core mobile processors.

Qualcomm

Qualcomm is also one of the companies that choose to use the Arm architecture, and its CEO Amon has predicted that by 2024, Arm-based processors will be widely used to power Windows PCs.

Since 2017, Qualcomm has been providing solutions based on the Snapdragon platform for laptops and has partnered with Microsoft to do a lot of work for the Windows-on-Arm ecosystem. After several years of hard work, it seems that the results have not been great, and the market share has not increased significantly.

On the one hand, not all Windows programs run perfectly on systems based on the Arm architecture, affecting the user experience. On the other hand, the Snapdragon platform only provides limited performance compared to the x86 platform, and the price is not low, and the attractiveness is limited. If compared with Apple's Mac products, which are also based on the Arm architecture, the gap is even greater.

IN 2021, QUALCOMM ACQUIRED STARTUP NUVIA FOR $1.4 BILLION, HOPING TO PROVIDE MORE PERFORMANCE AND EFFICIENCY FOR WINDOWS PC WITH THE HELP OF ITS TEAM AND THE ARM CORE DESIGNED. However, it is precisely because of the acquisition of NUVIA that Qualcomm and Arm have fallen into a pull.

In addition to the three major enterprises, Arm is also sprinting into the field of data centers with higher computing power and requirements. Amazon and Alibaba have already started developing Arm-based products by 2022, Microsoft and Google are also starting projects to use Arm products in 2022, and HPE is expanding its adoption of Arm-based servers. Nvidia is now pushing its GPUs to support the Arm architecture, while Ampere is developing Arm-based chips.

The wave of Arm is getting bigger and bigger.

02, "falling": Arm is in turmoil and riddled with lawsuits

Unlike the siege pool of the Arm architecture, Arm has been in turmoil.

Arm: Things are not good in China

After two years of coach change, half a year later, Arm China has new news.

According to foreign media reports, in the first year that the management appointed by SoftBank Group took over Arm China, Arm China's revenue increased by more than 30%, but at the same time, Arm China's net profit plummeted by 96%.

Specifically, according to Arm China's unaudited earnings statement in 2022, Arm China's revenue in 2022 reached nearly US$890 million, an increase of 33.8% year-on-year compared to US$665 million in 2021; Net profit plummeted 95.96% to US$3.2 million from US$79.2 million in 2021.

It should be noted that, according to the document notes, Arm China lost $37 million in foreign exchange in 2022, compared to a positive gain of $9 million the previous year. If the impact of exchange rates in these two years is excluded, Arm's net profit in 2022 will also exceed US$40 million, a year-on-year decline of about 37.9%.

Not only did net profit decline, but the previous week, there was also news in the industry that after Arm announced a 15% global layoff, Arm China also raised the "knife of layoffs". The number of layoffs involves nearly 100 (90-95), and the compensation ratio for layoffs is "N+3", most of whom are R&D engineers. The dismantling department mainly involves two teams, SoC and HPC, and these two departments are also the two business segments that Arm China CEO Wu Xiong focused on promoting during his administration.

Among them, the HPC team is still focusing on IP research and development, targeting high-performance CPUs and high-computing power AI chips. In addition, the SoC team undertakes the diversified actual needs of local chip manufacturers, relying on Arm and Arm's self-developed product matrix in China, to carry out some business similar to semi-custom chip design services. But in May last year, those projects were embarrassed when Mr. Wu lost ground in a management battle and a new management team took over.

In response to the layoffs in Arm China, Arm said in a statement sent to domestic media: "Arm China is an independent and independently operated entity of Arm and we cannot comment on its personnel arrangements. However, we expect our business in China to remain unaffected and continue to maintain its strong momentum. ”

Some analysts pointed out that this move may be related to Arm's removal of obstacles to accelerate the IPO plan.

A troubled IPO

In 2016, Son's SoftBank Group acquired Arm for $32 billion, ushering in a drastic change in the semiconductor industry. To raise the money needed for the acquisition, SoftBank even sold its stakes in Chinese internet giant Alibaba and Finnish mobile game giant Supercell.

The acquisition was seen as "a big gamble." Just a few short years later, the Vision Fund's portfolio went into the red. In 2020, SoftBank Group planned to sell Arm to Nvidia, but was aborted due to regulatory opposition. Nvidia CEO Jensen Huang said after the failed acquisition: "We gave it our best shot, but there were too many obstacles to convince the authorities to approve the merger. ”

The overflowing acquisition ended in failure, but SoftBank still doesn't seem to give up.

Ian Thorton, Arm's head of investor relations, wrote in a November letter that Arm's public listing plans had been delayed from early 2023 due to concerns about the market. "Obviously, we want to get it to market as soon as possible. But given the current uncertainty in the global economy, given the state of financial markets, this may not happen before the end of March 2023. ”

In February, after SoftBank released Arm's third-quarter earnings report, SoftBank Chief Financial Officer Yoshimitsu Goto said that SoftBank aims to have Arm listed by fiscal 2023 (by the end of March 2024).

Speaking about the specifics of Arm's listing, Goto revealed: "Preparations are underway and we will see how the market is. Arm CEO Rene Haas also admitted in an interview: "We are doing everything we can to achieve this goal this year." ”

The lawsuit battle with Qualcomm

Just as Arm was preparing for an IPO, a breaking news broke that Arm took its largest customer Gao to court, because Qualcomm did not directly purchase licenses from Arm after acquiring chip startup NUVIA in early 2021 because it indirectly obtained the Arm CPU instruction set.

But soon, Qualcomm filed a counterclaim against Arm, the counterclaim data shows that Arm is seeking to change its licensing model, Arm told the terminal equipment vendor that it is expected that it will no longer directly license the architecture IP to the chip vendor after 2024, and the chip vendor will not renew the contract once the contract expires, and Arm will skip the chip vendor to collect patent authorization from the equipment manufacturer, if the terminal equipment vendor does not accept the new terms, it can no longer legally use any chip based on the Arm architecture.

It is further reported that Arm will prohibit manufacturers from using third-party GPUs, NPUs, ISPs and other modules in ArmCPU-based SoC chips in the future.

If this rumor is true, it will not only have a huge impact on Arm's future, but also the entire mobile market manufacturers, architectures, SOC products, will have a disruptive impact.

Although the two parties have a long-term cooperative relationship, they are still going to court in the face of a conflict of commercial interest, if we delve into the controversial points of this lawsuit: first, the reasonable attribution of Nuvia's technology license, whether Qualcomm can use Nuvia's ALA architecture to authorize new product research and development; Second, the applicable premium rate.

At present, the two sides have different opinions on the two major disputes, and before the court judgment is released, the use of Nuvia technology is completely in the hands of Qualcomm. Before the dust settles, Qualcomm may adopt a procrastinating attitude, using Nuvia technology while fighting infringement lawsuits.

The lawsuit is about the possibility of a game-changer for the entire industry, and if both sides take a hard line, it is not impossible for both sides to lose.

03. Summary

Arm is charging in the market, and SoftBank has been twisted and turned. For SoftBank, Arm is not a successful investment, compared with Arm's more than a billion revenue, SoftBank wants to recover the more than 30 billion spent at least a few decades; For the UK, the loss of the chip "pearl" is a pain for the British government. Now Arm is like a hot potato, whether to remain independent or fall, SoftBank is "dilemma".