Samsung Electronics-Arm deal mooted by Son a real head-scratcher

A journalist raises her hand to ask a question to Japan's SoftBank Group CEO Masayoshi Son during a news conference in Tokyo, November 5, 2018. [REUTERS]

SoftBank Group CEO Masayoshi Son has floated the possibility of forming some kind of partnership with Samsung Electronics in the sale of Arm, a British chip designer owned by the Japanese tech company.

"I want to discuss a strategic alliance for Arm with Samsung," he said, according to a Bloomberg report.

The chip design company, which is based in Cambridge, Britain, and was purchased by SoftBank in 2016 for $32 billion, has been put up for sale by SoftBank. It is set to be listed after a $40 billion acquisition by Nvidia fell through due to regulatory concerns.

The Japanese company intends to take Arm public, but the listing process has become the subject of considerable discussion. British authorities are pushing for a dual New York-London listing rather than just a single listing in the United States.

Analysts are left scratching their heads.

A full acquisition of the company by Samsung Electronics is probably impossible for regulatory reasons, according to analysts. The Nvidia deal fell apart after U.S. Fair Trade Commission objected to the transaction on the grounds that key chip technology would be in the hands of a single chipmaker.

Arm owns technology that is used in 95 percent of phones and an increasing percentage of computers and it has traditionally licensed it in a neutral and transparent manner to all clients. Its neutrality is seen as essential to the smooth operation of the telecommunications device market.

Arm's cores, which are processing units that are the essential units that go into making a microprocessor, can be found in a wide range of devices, from the most advanced smartphones to the most basic of appliance, and are utilized by Apple, Samsung Electronics, Qualcomm and countless smaller electronic companies.

It's even hard to get the numbers to add in any proposed Arm acquisition deal.

"The market sets Arm's valuation between 55 trillion won and 80 trillion won, and Samsung's total cash reserves are slightly over 100 trillion won," said Jeff Kim, head of technology team at KB Securities. "So, buying the chip designer as a whole is a risky bet as Samsung Electronics opts to set sights on more diverse areas like foundry and automotive."

A group of chipmakers could form a consortium to buy Arm or any individual company might buy a smaller stake in Arm, though this could also be made difficult by the differing priorities of the chipmakers.

"Qualcomm, SK hynix, Samsung Electronics and Intel have expressed interest in acquiring Arm after forming a consortium but the chances are slim," said Kim Hyung-tae, an analyst at Shinhan Financial Investment.

Samsung Electronics hit a fresh 52-week low on Thursday and closed at 54,400 won ($39), fowling the reports. SoftBank Group, which trades in Tokyo, lost 2.02 percent the same day to close at 5,343 yen.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]