Rebirth of England.

Chapter 654 ARM Company
"Your Highness, we have reached an agreement with NXP Semiconductors. They have finally agreed to sell their shares in ARM. Of course, we need to pay a premium..."

Barron learned the news during a call with Finn Hudson, CEO of Global Industrial Investment Fund (GII Fund) in early February.

In fact, as early as the end of last year, the GII Fund tried to acquire the shares of ARM held by NXP Semiconductors, but the other party has never agreed to the acquisition.

Finally, when the subprime mortgage crisis caused NXP Semiconductors' business revenue to decline sharply and it needed cash flow, they finally agreed to the acquisition.

The reason why they want to acquire ARM is that this UK-based company is very important for the future development of smart phones - both Apple's iPhone and Android phones are based on ARM's chip architecture.

And in the future handheld smart device market, ARM architecture chips will account for more than 90% of the market share.

In Baron's previous life, SoftBank Group spent US$2016 billion to complete the acquisition of ARM in 320. Later, Nvidia was also willing to purchase ARM from SoftBank for more than US$400 billion, but the deal ultimately failed.

Many people may have heard of these, but few people know that in 2010, Apple tried to acquire ARM for more than $80 billion, but was ultimately rejected by ARM's board of directors...

In fact, there is a great connection between Apple and ARM - Apple was originally the company's largest shareholder, and it is not an exaggeration to say that ARM once saved Apple.

In the agreement reached this time, GII Fund will acquire 14% of ARM's shares held by NXP Semiconductors for US$28 billion.

Even though it was affected by the subprime mortgage crisis, because Apple and Google's systems both use the ARM architecture, the total shipments of ARM chips reached 100 billion last year. Therefore, relatively speaking, ARM's decline was not high when the entire stock market was not booming, and its current market value is around US$40 billion.

The GII Fund also reached an agreement to acquire ARM shares from NXP Semiconductors at a 20% premium.

As for why NXP Semiconductors holds ARM shares, we have to start with the history of ARM.

The predecessor of ARM was Acorn, which was founded in Cambridge, England in 1978.

In 1983, Acorn's RISC machine project began.

RISC, short for Reduced Instruction Set Computer, is a type of processor that, although it cannot process as many instructions as a regular CISC (Complex Instruction Set Computer), is faster.

The result is a processor that's powerful and fast enough to make up for the fact that instructions have to go through more steps to complete.

In addition to the advantages in functionality and speed, the device also consumes very little power, which has attracted the interest of Apple.

In the late 20s, Apple began working with Acorn.

Then on November 1990, 11, the two companies joined with chip maker VLSI Technologies to form a company, Advanced RISC Machines.

This was later to become ARM, in which Acorn held 24% of the shares, Apple held 43% of the shares, and VLSI Technologies held the remaining 33% of the shares.

In 1998, ARM was listed on both the London Stock Exchange and NASDAQ...

At the same time, at this time, Jobs returned to Apple, which was on the verge of bankruptcy. In order to save Apple, after ARM went public, they sold their 43% of ARM shares one after another, and obtained a return of more than 400 times the initial investment. With these funds, Jobs developed the iPod and successfully saved Apple.

This is why ARM once saved Apple, and why all subsequent Apple products, including the iPod and iPhone, use RAM chips.

But what’s interesting is that more than a decade later, Apple once again wanted to acquire ARM for $80 billion, but was rejected…

Another company, VLSI Technologies, which held a 33% stake in ARM (diluted to 28% after its listing), was maliciously acquired by Philips for US$1999 billion in 10, the second year after ARM went public.

Later, its semiconductor business, NXP Semiconductors, was spun off from Philips, and the assets of VLSI Technologies were also transferred to this company.

This is why NXP Semiconductors currently holds a 28% stake in ARM.

As for Acorn, the predecessor of ARM, it was acquired by a private equity company in 1999 after its name was changed to Element 14.

At the time, almost all of the company's revenue came from the 24% stake it retained in ARM.

But these shares have now been sold out.

The reason why ARM has been able to develop to its current level is due to their special business model - they no longer produce chips, but instead transfer chip design solutions to other companies through licensing, which is the "Partnership" open model.

Specifically, ARM has three licensing methods: processor, POP and architecture licensing.

Processor licensing means authorizing cooperative manufacturers to use processors designed by ARM. The other party cannot change the original design, but can adjust the frequency, power consumption, etc. of the product according to their own needs.

POP (processor optimization pack) licensing is an advanced form of processor licensing. ARM sells optimized processors to authorized partners to facilitate them to design and produce processors with guaranteed performance under specific processes.

Architecture licensing means that ARM will authorize its partners to use its own architecture, making it easier for them to design processors according to their own needs (for example, Qualcomm's Krait architecture and Apple's Swift architecture were designed after obtaining ARM's authorization).

It is also relying on this technology licensing method that ARM architecture chips later occupied more than 90% of the market share of handheld smart device chips.

This is also the reason why ARM refused to be acquired by Apple in Baron's previous life, but later agreed to be acquired by SoftBank.

After all, ARM mainly makes profits by licensing its chip technology to all companies. The board of directors is certainly unwilling to sell itself to Apple, a hardware device manufacturer, which would affect its independence and make its technology likely to be monopolized by Apple, thus losing ARM's business model.

SoftBank is not a device manufacturer and does not need to worry about losing ARM's independence after being acquired.

As for Nvidia's subsequent failure to acquire ARM, this factor was also influential.

Barron's acquisition of ARM through the GII Fund will not encounter too many obstacles. After all, Honor Electronics belongs to the Caesar Fund and has nothing to do with the GII Fund.

Therefore, after acquiring 28% of ARM's shares, the next goal of the GII Fund is to negotiate with ARM's board of directors to complete the acquisition of the company.

After reaching an acquisition agreement with NXP Semiconductors, Finn Hudson is about to fly back to England to start contact with ARM.

(End of this chapter)