Behind The ARM-SoftBank Deal

The mega-merger is just the beginning.

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Weeks after SoftBank announced plans to buy ARM for $32 billion, the deal continues to reverberate across the global semiconductor industry.

Any acquisition of this magnitude leaves customers, suppliers and partners a little skittish. And for good reason—ARM is the No. 1 supplier of commercial processor IP. Much of the fabless semiconductor market, as well as some IDMs, cross paths with ARM in some very profound ways. Even if they don’t license ARM IP, chances are high that they deal with one or more of ARM’s interconnect standards.

It doesn’t help that the Softbank deal took the market by total surprise. ARM was considered by many too big to be acquired. On top of that, there was widespread speculation that the U.K.’s “Brexit” vote to leave the European Union would quash the market for acquisitions of British companies.

But underlying all of this is a potent reminder that the IoT world is not going to be business as usual. In addition to fusing together various technologies and markets that do not go together in obvious ways, it is drawing together businesses across more markets than most analysts can follow.

Both SoftBank and ARM have made it clear that Internet of Things technology is at the center of the planned combination.

“When I think about the investment and the commitment that’s going to be required to develop the future technologies that we are talking about — things like the Internet of Things—things like fully autonomous cars — these are technologies that will require long-term investment, and not an iterative on what we have today,” said ARM CEO Simon Segars.

SoftBank Chairman and CEO Masayoshi Son said in a statement, “ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the Internet of Things.”

As New York Times reporter Leslie Picker wrote, “By and large, ARM is a special case for several reasons.” These include the company getting most of its revenue from Asia and North America, the fall in the value of the British pound, and a lack of significant overlap between ARM and the SoftBank Group.

My two cents: ARM’s top management will stay in place and the company will increase its employee ranks in the U.K., but it should be abundantly clear that the IoT is going to shake up far more than just one company or one country or one market. The IoT is a global race rolling out across a global economy. The stakes are huge, the acquisitions are unlikely to abate, and the sources of those deals can come from markets and regions and places where no one is currently looking. More surprises are very likely.

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