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SK hynix plots Arm swoop

Less than two months after Nvidia gave up its dream to own Arm, the chip designer could already be back in play.

It emerged this week that South Korean memory chip maker SK hynix has eyes on Arm and is on the lookout for like-minded partners.

“We are reviewing possibly forming a consortium, together with strategic partners, to jointly acquire it,” said Park Jung-ho, vice chairman and CEO of SK hynix, in this Yonhap report on Wednesday.

It’s worth remembering that as well as heading up SK hynix, Park is also the CEO of SK Square, which was spun out of SK Telecom last year and given a specific mandate to seek out mergers and acquisitions in the semiconductor sector.

If an offer materialises, the hopeful bidder might not encounter the same elephant in the room that was present when Nvidia chanced its arm for Arm in 2020. When that deal was struck, it was patently obvious to most people that Nvidia, being a licensee of Arm’s processor designs, had clear incentives to abuse that position were it to take control of Arm.

Those same incentives don’t exist in the case of hynix, because rather than processors, it makes and sells memory chips, and more recently image-sensors. Arm doesn’t play in those markets. That’s not to say a conflict of interest couldn’t arise in future, of course. Should hynix or Square want to acquire an Arm licensee, or undertake the time and expense of producing and selling Arm-based processors, its ownership of Arm would merit close scrutiny.

SK hynix also recently showed off a memory chip that includes processing capabilities, so there’s the vaguest hint of an overlap there. However, none of these factors in isolation or taken together merit a sufficient case for stopping hynix from buying Arm today.

Furthermore, hynix wants to put together a consortium to acquire Arm, rather than own it lock,, stock and barrel, which also might help win over the antitrust watchdogs.

“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,” Park said in the Yonhap report.

“I don’t believe Arm is a company that could be bought by one company,” he said.

Indeed, that could be for regulatory reasons or the sheer fact that Softbank wants a lot of money for it.

After the Nvidia deal collapsed, Arm parent Softbank said it would float the company instead. Last week, sources cited by Bloomberg said that Softbank is seeking a $60 billion valuation of Arm when it goes public. By comparison, Nvidia’s deal to buy Arm from Softbank valued it at $40 billion. The valuation when Softbank bought Arm in 2016 was around $30 billion.

In addition, $60 billion looks like a pretty big price tag for a company that turned over less than $2 billion in fiscal 2021. While there’s no denying that semiconductor demand will continue to be healthy for many years to come, there aren’t many standalone companies out there that can justify meeting Softbank’s steep asking price.

 

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