SK Hynix may head up consortium to buy Arm

Post Nvidia deal collapse, Intel expressed similar interest back in February

SK Hynix is reportedly considering forming a consortium to acquire UK chip designer Arm, however, the idea is said to be at a very early stage of planning, and Hynix may not actually proceed with the move.

The potential purchase was disclosed in comments from SK Hynix vice chairman and co-CEO Park Jung-ho following the firm's annual general shareholders meeting held at its headquarters in Icheon, South Korea.

Arm is seen as a kind of neutral third-party provider of chip designs and the architecture that underpins them.... and therefore anything that threatens Arm's independence is a massive red flag to the rest of the industry.

"We are reviewing possibly forming a consortium, together with strategic partners, to jointly acquire it," Park Jung-ho told reporters at the meeting, according to Yonhap news agency.

The same source also quotes Park mentioning the potential move at the earlier annual shareholders meeting of SK Square, the investment arm of SK Group, parent company to SK Hynix.

"I want to buy Arm, if not entirely. It doesn't have to be buying a majority of its shares to be able to control the company," he is reported as saying.

SK Square was itself set up to invest in highly promising companies in the semiconductor and ICT sectors, and so would likely play a part in any planned purchase of Arm.

The move follows the collapse of the planned sale of Arm to Nvidia by its owner SoftBank in February, and the subsequent decision by SoftBank to pursue a public offering (IPO) of the chip designer instead.

The sale to Nvidia fell through partly because of significant regulatory challenges that it faced, not just from the UK government’s Competition and Markets Authority, but also the European Commission, the US Federal Trade Commission and the Chinese antitrust authority. Other technology companies also voiced their concerns that the acquisition might stifle competition by giving Nvidia the power to limit access to Arm's chip designs.

These regulatory challenges and the fear of Arm’s widely used technology falling into the hands of another company will be one reason why SK Hynix may be considering forming a consortium, according to Richard Gordon, VP for Semiconductors & Electronics at analyst Gartner.

"Any transaction that would see Arm owned by another chip firm is going to be problematic," he told The Register.

Arm is seen as a kind of neutral third-party provider of chip designs and the architecture that underpins them, Gordon said, therefore anything that threatens Arm's independence is a massive red flag to the rest of the industry.

Forming a consortium of various interested parties might be one way of dealing with this thorny issue, he added.

Intel CEO Pat Gelsinger previously said that Intel would be interested in participating in any consortium that emerged to take ownership of Arm. Gelsinger made the remarks at Intel's Investor Day held in San Francisco in February.

"We're not big users of Arm, but we do use Arm. We're going to get to be bigger users of Arm as we make it part of our IFS (foundry business) agenda as well," he told Reuters at the time. "So if a consortium would emerge, we would probably be very favorable to participate in it in some manner."

Elsewhere, the FT reported that Arm is to transfer shares in its Chinese joint-venture Arm China over to a SoftBank special purpose vehicle, in order to expedite the planned IPO.

Following the move, Arm China will be treated as just another Arm licensee, rather than as the subsidiary it currently is, partly owned by Arm and a Chinese consortium.

The Chinese subsidiary has proven to be troublesome for Arm, acting as an independent company that pursues its own agenda.

We contacted Arm and Softbank for confirmation of the details in this article, but both declined to comment.

Meanwhile, Goldman Sachs is expected to be appointed as lead underwriter for Arm's public offering, with SoftBank said to be pursuing a valuation of at least $60bn for the firm.

SoftBank founder and CEO Masayoshi Son told investors last month: "We will aim for the biggest IPO ever in semiconductor history."

SoftBank has previously stated that it aims to complete the Arm public offering within the fiscal year ending March 31, 2023. ®

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