The firm, which is owned by Japan's SoftBank, is a world leader in designing chips that are used in smartphones across the world and aims to be a major player in artificial intelligence (AI).
In documents filed on Monday, Arm said it planned to list on the Nasdaq, which specialises in tech shares, after opting earlier this year against floating on the London stock exchange.
"I think it's a very good sign for the global tech market, especially with this AI gold rush. It's the start of a new tech bull market," Dan Ives, senior equity research analyst for the technology sector at Wedbush Securities, told AFP.
Arm did not specify how many shares it plans to list, so it is impossible to estimate how much the company might raise.
But details in its prospectus showed the firm is valued by SoftBank at $64 billion, more than double the amount that the Japanese firm paid for it in 2016.
That would place it close to the $68 billion market capitalisation of electric vehicle manufacturer Rivian when it listed in 2021 and not far from the $75 billion for Uber in 2019.
But it would still be far from Chinese conglomerate Alibaba, which floated in 2014 with a valuation of $231 billion. It was the biggest flotation ever at the time and now has a market cap of $1.8 trillion.
Arm dominates the design sector for processors in smartphones, with the firm's prospectus claiming around 70 percent of the world's population uses its Arm-based products.
"Semiconductor technology has become one of the world's most critical resources, as it enables all electronic devices today," the firm said in its prospectus.
"At the heart of these devices is the CPU (central processing unit) and Arm is the industry leader of CPUs."
- AI 'calling card' -
Analysts said SoftBank had been careful about choosing the timing of the share offering, with tech stocks having had a wild ride during 2022 involving mass layoffs and costly investments that failed to pay off.
"The Japanese conglomerate had been holding out for the best market conditions," said Susannah Streeter, analyst at Hargreaves Lansdown.
She said the tech market was calmer than it had been last year but recent weaknesses had pushed SoftBank to list Arm sooner rather than later.
The smartphone market is in one of its worst slumps in a decade and semiconductor firms are facing a decline in demand.
Arm also said in its prospectus it was "particularly susceptible to economic and political risks" affecting China, the world's biggest market for smartphones.
But, like many companies, it is pivoting hard towards AI. Streeter noted the firm will use the emerging tech as its "calling card" to entice investors.
The shares are likely to go on sale in September.
Michael Hewson, chief market analyst at CMC Markets UK, said Arm was likely to benefit from "a greater degree of autonomy" after the IPO, noting that its performance under the stewardship of SoftBank had been "mixed, swinging to a $65.5-million loss" in the first quarter.
But he was cautious about investor appetite for the IPO at a time of rising interest rates.
"Investors will certainly want a piece of a business that could see its revenues grow quickly, as the enthusiasm for AI increases," he wrote.
"The key factor will be getting the price right, as new investors may not want to pay an ARM and a leg for it."
SoftBank had tried to sell Arm last year for $40 billion to Nvidia, currently the leader in the market for the kind of powerful processors used in AI applications, but the sale collapsed because of regulatory concerns over competition.
Arm, headquartered in the city of Cambridge in England, has nearly 6,000 employees. It reported revenue of $2.7 billion last year, largely the same as the year before.
Five things to know about British chip champion Arm
London (AFP) Aug 22, 2023 -
Here are five things to know about British chip designing giant Arm, which has launched what could be the biggest US share offering in years.
The company, which plans to list on the New York stock exchange, says in its prospectus it is valued by Japanese parent SoftBank at $64 billion.
- Nearly all smartphones -
Rather than making chips itself, Arm licenses designs for the essential component that enables devices to function.
Founded in 1990, it dominates the global market for chips for smartphones. Its processors were found in more than 99 percent of all the world's smartphones in 2022.
Arm technology is also found in the majority of tablets and digital TV screens, as well as sensors, cloud services and chips with integrated processors.
About 70 percent of the global population uses products based on Arm technology, according to the company's own estimates.
More than 30 billion chips with Arm design were shipped in the financial year to March 31, an increase of around 70 percent since 2016.
Arm earns royalties for nearly all the chips designed and produced using its technology.
- A British success story -
Arm is based in Cambridge, a city renowned for cutting-edge UK science that home to pharmaceutical giant AstraZeneca and one of the world's leading universities.
The announcement in March that Arm, a strategic British success story, was planning to list on the New York stock exchange, was a blow to the UK government.
Prime Minister Rishi Sunak had sought for months to persuade it to list in London, where the top-tier FTSE 100 shares index is seeking to remain a strong global force amid increased competition from European rivals following Brexit.
- Failed mega takeover -
In February, US chip giant Nvidia scrapped a blockbuster $40-billion takeover of Arm, following regulatory objections.
The planned takeover by Nvidia collapsed in the face of competition investigations by watchdogs in Britain, the European Union and the United States.
They had voiced concerns about the key position the acquisition would have given Nvidia in the strategic chip sector. The US firm is known for graphics cards favoured in the video game industry and the leader in processors used for developing artificial intelligence applications.
The UK government was particularly alarmed by the takeover bid, given what it said was Arm's vital role in Britain's technology sector and its overall economy.
The failure of the bid was a financial blow for SoftBank, which had purchased Arm in 2016 for $32 billion.
Its starting price for Arm was $40 billion. The value of the acquisition then shot up because part of that price was to be paid in Nvidia shares, which had soared on the stock market.
- Dependence on China -
Nearly 25 percent of Arm's turnover is generated by a single client -- Arm China.
Despite its name, the latter is neither controlled by Arm nor by SoftBank, which indirectly owns a minority share.
"We depend on our commercial relationship with Arm China to access the (Chinese) market," said Arm in its prep-IPO documents.
"If that commercial relationship no longer existed or deteriorates, our ability to compete in the (Chinese) market could be materially and adversely affected," it warned.
The company is particularly susceptible to the rising international tensions around the strategic chip sector, particularly between the United States and China.
- Artificial intelligence -
Arm hopes to play a strategic role in generative artificial intelligence (AI), which is capable of learning from data to create new content such as text, music, speech, video and code.
The company says its microprocessors already make modern smartphones compatible with AI and machine learning.
In the future, new generations of Arm chips will need to contribute to the emergence of algorithms for use in new applications, particularly in AI.
Otherwise, they will be overtaken by events, according to Arm, which says it is working on the issue with Google parent company Alphabet, General Motors' self-driving car subsidiary Cruise, Mercedes-Benz, Facebook parent Meta and Nvidia.
Related Links
Computer Chip Architecture, Technology and Manufacture
Nano Technology News From SpaceMart.com
| Subscribe Free To Our Daily Newsletters |
| Subscribe Free To Our Daily Newsletters |
