SoftBank plans to buy ARM, a maker of iPhone microchips

The Japanese firm, SoftBank, plans to scoop up British chip designer and major Apple partner ARM Holding, for $31.4 billion, reports the BBC News. ARM employs more than 3,000 people and designs microchips used in most smartphones (including the iPhone).

According to the BBC, ARM will keep its headquarters in Cambridge and at least double the number of its staff over the next five years. However, according to re/code, other companies could enter the fray with the result being a bidding war for ARM. Apple, arguably ARM’s most important client, and Intel, which lost the mobile chip war to ARM, are both potential buyers, the article adds.

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Regarding SoftBank’s purchase of ARM, Mark Skilton, a professor of Practice at Warwick Business School and an expert on technology and the Internet of Things, has made the following statement:

“The purchase by Japanese telecom SoftBank of ARM holdings for $32 billion is a logical step for ARM’s shareholders in an increasingly tough global chip market seeking new growth markets.

“The 50% premium on valuation is a good price with a conglomerate that has a track record in company purchases positioning more investment in ARM, assuming the UK government doesn't block the deal for national strategy reasons.

“The concern of brain drain and ARM business moving from the UK must be considered in this equation based on its knowhow and leadership in chip design.

"The 'Internet of Things' (IoT) cited by CEO Masayoshi Son of SoftBank is the new chip market for connected devices.  While storage and chip speed is one area, ARM has excelled at chip design for many consumer devices including the Apple iPhone.   

“This move by ARM is recognition of the limits of this current market and the need to invest to expand beyond PC and mobile into the multitude of consumer home, building, car and other platforms emerging in the IoT.

"This needs bigger pockets to take on completion to scale these markets. ARM's bold move was inevitable regardless of Brexit, but will be interesting to seek reaction in market and competitor moves.

“Investment in the IoT requires both software and hardware development skills to embed 'smart' into mobile devices, car, buildings and everyday objects that that few companies have in both areas.

“Telecoms companies have had an interesting challenge to position the vital network 'glue' to connect all these devices and services, but seek a bigger part of the market share through similar integration into the delivery device end.

“Telecom provider SoftBank is seeking to expand its portfolio into strong chip design as well as a profitable successful business in ARM to try to establish a bigger share of the IoT market.”