What's Arm Ltd. worth?
That's a question a lot of people will be asking leading up to the flotation.
In 2016 a lot of commentators thought Softbank had paid more for Arm than it was worth. That the value of Arm rose to $60Billiion in 2021 was due to the fact that Nvidia's purchase price included some Nvidia shares (which rose because of the audacious monopoly buyout proposal), but for obvious reasons Arm/Softbank would like everyone to think that that is Arm's value.
The ARM ISA has a number of things in its favour:
- Arm is a profitable company.
- The ARM ISA has been successful across the spectrum of processing, and is poised to take X86's last bastions of high end consumer computing, and data centres.
- The world has a greater appetite for processors now than ever : and particularly the type of processors that the ARM ISA produces.
- ARM has a number of OSs running on it, each with a mature app ecosystem, which users are locked into to some extent.
- The world was disabused of the myth that X86 is needed for serious computing by Tim Cook's announcement of Apple Silicon in 2020. He anointed ARM as the ISA of the future.
However, Arm is also facing a number of issues:
- The pandemic spike aside, the desktop market has collapsed, laptop sales are plateauing, and the smartphone market is saturated. And with many of the world's economies looking fragile, this is perhaps the worst possible moment to break into high end consumer computing.
- Arm is being floated, in part, because it is seeking funding to enable the development it needs to do in new sectors of processing: AI, ML, Edge, Auto, etc.. It won't be attractive to investors looking for a quick profit.
- Arm Ltd finds itself a pawn in the US-China tech trade dispute, with some Chinese ARM-using companies significantly reduced in their market share. Floating Arm Ltd on a US stock exchange further exacerbates this : the perception being that Arm becomes an American company. China has vowed to be US-IP-free by 2035. That potentially puts ARM (& X86) out of China, which is 20% of the world's tech market. How successful the Chinese government will be in weaning its population off US intellectual property remains to be seen, though. (The indisciplined practice of the China-Arm subsidiary has also been causing significant problems for Arm Ltd., and threatens to mar the listing.) ARM is no longer the "Switzerland of ISAs" that it once claimed to be, which is a serious dent. That epithet now goes to:
- the open-standard, RISC-V ISA. It gained much attention at the start of the tech trade dispute, which continued through the potential Nvidia acquisition of Arm. Its momentum seems undampened during the flotation uncertainty. It has already caused Arm to have to alter its business model for lower end processors, and threatens to compete with ARM at all levels in the near future. China in particular is working tirelessly to advance RISC-V designs, and to rebase open source software for RISC-V. RISC-V represents an irreparable slow puncture of Arm's bubble. The longer Softbank waits to float Arm; the more powerful RISC-V processors get, and the bigger the app ecosystem running on the ISA becomes : Arm diminishes in value as RISC-V becomes more viable.
Biting the hand that feeds IT
