Trouble is, its success and its sector has given it a profile that attracts attention from the likes of Softbank who have other ideas. A company doesn't need to have a Nvidia like P/E ratio to be successful.
Absolutely true. Sadly nowadays, especially in the US, and especially in tech, unless the company is growing like crazy or massive, it's considered as insignificant and dimissed.
Maybe in Silicon Valley, were decades of totem disdain for anything resembling a business education is starting to take its toll. For anyone with a financial background, slow-growing profitable companies are most American industry. If you want to grow slowly (or barely at all), and want investors who like that, offer a dividend and price at a reasonable P/E.
I wonder to what extent the overarching business culture of the UK (which I'd categorise as being generally apathetical, if not hostile, to the engineering profession) might have anything to do with it.
(...speaking as a former UK eng myself)
That's nothing to do with it - the company is only listing on NASDAQ - ARM has office all over the world but will still be based and managed in the UK along with most of its employees (engineers) like when it was owned by a Japanese company.
Listing on the tech heavy NASDAQ rather than the LSE gives the company more access to investors that are likely to buy shares: retail, commercial, and hundreds of index trackers and funds - increasing the share price.
A lot of US funds have restrictions as to how much they can invest outside the US.
Any chance you could elaborate on this? Arm exists and is British, after all.
This almost certainly required a personal guarantee (the friend would have to promise to repay the loan in the case the LLC could not).
It begun with the invention of the computer as we know it... - Charles Babbage,"Father of the computer", British - Alan Turing, "Father of modern computer science", British
Then there was Margret Thatcher who decided the internet was a fad and wasn't worth investing in internet infrastructure in the country.
Where did the multi billion (if not trillion by now) industry end up? Silicon Valley and elsewhere....
Bravo UK... Bravo </sarcasm>
The mistake Thatcher made was to open up the telecoms market to competition at a time when the legacy provider (BT) were starting to build a high speed internet highway/backbone. In hindsight, this could indeed be considered an error but looking how BT have fared since, perhaps not?
This seems unbelievable now, but the relevant reference is https://www.techradar.com/news/world-of-tech/how-the-uk-lost...
What about indexes? If they qualify for NASDAQ or some other major index, there's some "mandatory" investment that gets triggered by a bunch of funds that do index tracking.
I would presume where you choose to list is kind of a flag of convenience, like it is in maritime. It's probably not as irrelevant as to where things actually happen as flying the Liberian flag or incorporating in Delaware but I'd bet it's close.
Yes, and yes.
> What about indexes? If they qualify for NASDAQ or some other major index, there's some "mandatory" investment that gets triggered by a bunch of funds that do index tracking.
NASDAQ is an exchange, not an index.
The most prominent index on NASDAQ is the QQQ, the top 100 stocks,market cap weighted.
But this is the big boy playground, the smallest stocks in QQQ should have at least $400B marketcap. ARM by the most optimistic estimation should be 1/10th of that.
Unstable government.
High tax.
Questionable access to other markets.
Questionable reliability when it comes to international agreements (which is pretty fucking vital to a company like AIM).
It's sad (I'm a londoner) but the UK cannot blame anyone but our selves. We're just going through the national equivalent of a tantrum.
What justifies such crazy increase in value? Also, I believe Nvidia overpaid for the company regardless. Nvidia was willing to pay $40b because they want a world-class CPU design team to integrate their GeForce IP into SoCs and service chips.
But a standalone ARM is not very valuable. The reason is that ARM's business model (licensing core designs and ISA) makes peanuts compared to Qualcomm, Apple, Intel, AMD, etc. In addition, ARM's biggest customers are also their biggest competitors. For example, Apple competes with stock ARM designs with Apple Silicon. Qualcomm will be competing with ARM designs via Nuvia chips. Ampere Computing just designed a custom ARM core of their own.
When ARM only license the ISA (Apple Silicon, Nuvia, and Ampere One), they make peanuts. When they license ARM core designs, they make slightly more than peanuts.
It's generally not a good business to invest in. I find it hard to justify the $60b - $70b valuation. No doubt Softbank will try to sell ARM as an AI company. It's not.
i agree.
> Arm reported $524 million in net income on $2.68 billion in revenue in its fiscal 2023, which ended in March
i find the current valuation ludicrous, and it seems like it's pushed more by Softbank's Vision Fund than a firm grasp in reality.
>i find the current valuation ludicrous, and it seems like it's pushed more by Softbank's Vision Fund than a firm grasp in reality.
Just for comparison, AMD, which is still quite small, gets about $2b - $4b annual net profit. Intel, before their recent disaster quarters, had as much as $24b in annual net profit.
$524m in net income is peanuts compared to the big boys. This is what I was saying in my original post. ARM is a more valuable company if they were acquired by Nvidia. As a standalone company, it's not that great. Again, a weird quirk of ARM is that their biggest customers are also their biggest competitors. This puts a cap on how much profit they can make. If ARM decides to raise licensing fees exponentially, which is likely not simple due to long-term contracts, then companies will seriously look to RISC-V.
Because ARM is the smallest fish in the pond, it can't pay for the best engineers. The best chip engineers will go to AMD, Intel, Nvidia, Apple, Qualcomm, and startups. ARM is where these companies go to poach.
I haven't looked into all their changes in detail but they're not just going to suddenly increase profit without their customers fighting back.
"Arm China is 25% of our revenue, but we have no control over them, they have failed to pay us in the past resulting in us taking on additional costs to recover the money, also we have no way of knowing what they actually owe us and other than what they say, which has already been a problem"
https://asia.nikkei.com/Spotlight/Caixin/In-Depth-How-SoftBa...
(page 18, FY2023)
96% gross profit margin? Ahh to be an IP licensing company....why would anyone invest in building physical things when there are opportunities like this out there! </s>
edit: clarify gross profit margin
Net income: 0.524 bb
So 19.6% profit margin. Still nice.
One option is to embrace it as an opportunity. ARM designs some pretty good CPU cores, so imagine they offered good RISC-V cores as well. RISC-V can be free, but a lot of companies still license core designs.
Forget it, Jake. It’s China.
I wonder how many of those are buried in landfill now.
(okay, maybe this is an exaggeration, but these small things are pretty much everywhere... not even speaking about chips in other, more complex devices)
In other words, nearly all of them.
I've started calling it "Landfill Boot".
“Despite our significant reliance on Arm China through our commercial relationship with them, both as a source of revenue and as a conduit to the important [Chinese] market, Arm China operates independently of us,” the prospectus warned, adding that Arm did not have any direct management rights or the right to representation on Arm China’s board.
They have designed a processor architecture that is RISC-style. For some companies, ARM sells the design and others manufacture the chip. So what do Apple and Qualcomm get out of it, if they design their own architecture? Is apple tacking on proprietary extensions or instructions?
Why didn't apple design a CPU architecture from the ground up ala RISC-V?
An ISA is the Instruction Set Architecture, the interface between software and hardware.
A microarchitecture is a hardware implementation of an ISA.
RISC-V is an ISA.
ARM is a company that has both an ISA (actually several, but their current is ARMv9) and a bunch of microarchitectures.
Their business model is to license their IP:
- They may license you a microarchitecture, so that you can include it in your chip's design.
- They may license you the ISA, so you can implement your own microarchitecture for the ISA. Note that you can't then license your microarchitecture to others, that's ARM's sole privilege.
RISC-V's instruction space has some room for custom extensions. Thus it can be adapted to find specific needs, without asking for permission nor opting out of the strongest software ecosystem which RISC-V is rapidly building.
But while RISC-V is pretty good technically, enabling the best processors, what's most disruptive is that it is an open ISA.
It means there's now an open market with RISC-V microarchitectures to license, from a range of vendors. There's also some open source microarchitectures.
Microarchitecture licensing aside, there's an ecosystem of companies offering related services, such as helping you verify your designs, trace your code and so on.
Reads like FUD, as you go on to list a bunch of items that RISC-V actually already delivers.
Point per point:
>long term support
Is achieved via upstreaming drivers[0] and providing documentation[1], something that e.g. StarFive is doing much better than Raspberry Pi ever has.
>strong software ecosystem support
RISC-V is rapidly building the strongest ecosystem.
>performance parity
JH7110 SoC used in boards like VisionFive 2 provides CPU performance between Raspberry Pi 3b and 4, at much lower power consumption.
TH1520 SoC used in boards like Sipeed Lichee Pi4A[2] provides performance above Raspberry Pi 4.
Both SoCs provide faster GPU (JH7110 is 4x that of Pi 4, TH1520 is faster), better hardware video codec blocks, cryptography acceleration, faster memory interface, faster I/O outside of the SoC and otherwise better and more built in peripherals.
Note: Raspberry Pi have been used as reference points as they are, by far, the most popular ARM SBCs.
>It'll be a few more years
As proven above, it's already there against the Raspberry Pi line.
But next year it'll be better, as RISC-V will finally compete with the fastest cores available. This is based solely on what's already announced (Ascalon, Veyron, P570 and so on).
RISC-V enables the best processors.
0. https://rvspace.org/en/project/JH7110_Upstream_Plan
I assume regulators would block a hostile takeover like they would a regular buyout if there are concerns regarding market power?
Quite honestly, ARM falling on its face hard is actually a benefit to Apple. That would mean that Apple Silicon and iPhone SoCs have less competition. Imagine if Qualcomm chips based on ARM designs are 5 years behind instead of the 2-3 years now.
But the Nvidia + ARM combo made sense from a technical and strategic standpoint though.
Made sense for Nvidia. Not for other Arm customers.
Was. They're now at Qualcomm.
You answered your own question:
> Quite honestly, ARM falling on its face hard is actually a benefit to Apple. That would mean that Apple Silicon and iPhone SoCs have less competition.
Very, very unlikely anyone would get a perpetual license that covers all future products just because they were a founding shareholder.
I did some detective work on this a while ago for my newsletter (link in bio) from behind the paywall:
> … Apple and Acorn were paying royalty fees soon after they founded the company why should that change to grant Apple a royalty-free license at some point later?
This idea that they have a special license keeps getting thrown about.
But nobody has ever been able to provide any proof or otherwise reference a believable source.
Until proven otherwise, it's a myth.
