ARM Gets OK to Spend Big on New Markets Under SoftBank Ownership

  • SoftBank CEO Masayoshi Son explains view of ARM’s strengths
  • Chip designer sees opportunity in market for connected devices

SoftBank Group Corp. Chief Executive Officer Masayoshi Son urged the company’s recently acquired chip-designer unit ARM Holdings Plc to make long-term bets on new markets it couldn’t risk exploring when it was a stand-alone company.

U.K.-based ARM, whose technology underpins almost all of the more than 1 billion smartphones shipped every year, has support to push ahead with efforts such as attempting to dent Intel Corp.’s domination of the lucrative server chip business and to bring more computing to products like automobiles, Son said Tuesday at a briefing ahead of ARM’s annual technology conference in Santa Clara, California.

Son is in the U.S. explaining what ARM can expect from the ownership of the Japan-based communications giant. To get a return on the $32 billion he bet on the chip designer, SoftBank’s biggest acquisition, Son needs its offerings to become as important in a wide range of new markets as they have been in the slowing phone business.

“Let me worry about the financial results and believe in the future direction and capability ARM has,” he said. “That’s what I really want ARM to do. Invest more for the future. That’s the key.”

Son said his investment is motivated by his belief that computer processing is finally coming to rival the power of the human brain. That means industries such as transportation, health care and finance are going to be fundamentally changed, offering an opportunity for the company that provides the underlying technology.

Dominant Rival

ARM’s technology, dominant in phones, is increasingly being used in a wide range of devices from washing machines to drones to industrial robots that are being connected to the internet and given processing power. That still hasn’t helped ARM break into in one of the biggest markets for semiconductors: computers. Intel’s products are pervasive in personal computers and server chips, where it has a market share of more than 99 percent.

Showing the benefits of its market heft, Intel’s data center division turned $4.5 billion of revenue into $2.1 billion of operating profit in the third quarter. On average, Intel’s peers in the semiconductor industry had an operating margin of less than half of that, at 20 percent, in the most recent quarter, according to data compiled by Bloomberg.

ARM Chief Executive Officer Simon Segars is going to invest more in areas where his company hadn’t been spending enough -- such as software development -- to help his customers’ customers make the switch from Intel. ARM provides designs and licenses fundamental technology to companies such as Qualcomm Inc., which uses them to design and produce semiconductors.

“That’s exactly the sort of thing that Masa wants us to do -- go invest heavily to grow new business and get more growth later,” Segars said in an interview, referring to Son.

Improved Security

To take advantage of its broadest opportunity for growth, in the Internet of Things, ARM will need component providers and device makers to put more effort into security, Segars said. ARM this week is announcing new chip designs typically used for the smallest, lowest-power devices, that contain hardwired security components previously only found in more powerful processors. The designs and software ARM is offering as a service will help customers speed up the introduction of security into chips small enough to fit into something like a medical patch or fitness monitor, he said.

“If IoT gets this rap of it being a big security threat, people just aren’t going to adopt it,” said Segars.

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