Jun 12, 2023

Intel Is in Talks to Be an Anchor Investor in Chip Designer Arm’s IPO

Liana Baker, Swetha Gopinath and Ian King, Bloomberg News

Signage outside Intel headquarters in Santa Clara, California, US, on Monday, Jan. 30, 2023. Intel Corp. fell the most since July after giving one of the gloomiest quarterly forecasts in its history. Photographer: David Paul Morris/Bloomberg , Bloomberg

(Bloomberg) -- Arm Ltd., the chip designer backed by SoftBank Group Corp., is in talks with potential strategic investors including Intel Corp. to anchor what will be one of the largest initial public offerings of the year, people familiar with the matter said.

UK-based Arm has held talks with other companies about participating in the IPO, according to the people, who asked not to be identified discussing confidential information.

Talks are in the early stages and could still fall apart ahead of the listing, they said. It’s also unclear how much would be invested in Arm, or what the structure would be. Representatives for Intel and Arm declined to comment.

Shares in SoftBank rose as much as 7.7% in Tokyo on Tuesday. Intel shares were up less than 1% Tuesday morning in New York.

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Arm is looking to raise as much as $10 billion in a New York listing later this year, having rejected repeated appeals from UK prime ministers to tempt the home-grown technology giant back to London, where it once traded. The lure of higher tech valuations and a deeper investor base in the US ultimately won out for Arm, which is expected to list on the Nasdaq exchange.

Build Momentum

Bringing on an anchor investor can help drum up interest and momentum in an IPO, especially in a rough market for new listings. If the talks succeed, Intel would eventually be listed in Arm’s IPO prospectus ahead of the listing.

Anchor investors buying $100 million to $200 million worth of shares have been popular for semiconductor-related IPOs in recent years. Growth equity firm General Atlantic invested about $100 million in Intel-backed Mobileye Global Inc.’s IPO last year while Qualcomm Inc. backed GlobalFoundries Inc.’s listing in 2021.

A key part of Intel Chief Executive Officer Pat Gelsinger’s push to return the company to the pinnacle of the semiconductor industry is a plan to open up its factories to other firms, even rivals. If he’s to be successful in competing with Taiwan Semiconductor Manufacturing Co. in outsourced production, Intel will have to produce chips that contain Arm’s widely-used technology.

The two have already announced a technical tie-up. Arm’s designs and industry-standard instruction set are used in everything from Broadcom Inc. networking chips to Apple Inc. processors in the iPhone and Macs to Qualcomm Inc.’s ubiquitous chips for mobile phones.

By taking a position in Arm, whose technology has enabled direct competition for Intel’s processors, Gelsinger may be seeking to show his commitment to Arm and to embracing that openness. Throughout its more than 50-year history, Intel’s plants have almost exclusively worked on its own designs.

“Intel’s talks to become a potential strategic investor in ARM’s upcoming IPO underlines the chip giant’s goal of becoming a key foundry for the fabless semiconductor sector and bringing back leading-edge manufacturing to the US,” said Bloomberg Intelligence analyst Kunjan Sobhani. “This is despite direct rivalry between Intel chips and ARM-based processors. It follows an Intel-ARM technical tie-up in April which, if combined with a strategic stake, could position Intel as a maker of chips designed on ARM architecture.”

Gelsinger has launched an ambitious plan to regain Intel’s lead in the semiconductor industry by building new plants and rapidly improving its manufacturing technology. It’s an uphill battle as the main market for Intel’s products — personal computer processors — has slumped. And the company is losing market share to Nvidia Corp., which has leveraged its prowess in graphics processors used in video games to become the leader for artificial intelligence chips. Nvidia, which became the first chipmaker to cross the $1 trillion mark in valuation, first eclipsed Intel in market capitalization in 2020, and now the two companies aren’t even close.

SoftBank founder Masayoshi Son has said he hopes the Arm IPO can be the largest ever by a chip company. Arm’s valuation still hasn’t been set and the company could be valued anywhere from $30 billion to $70 billion, Bloomberg News previously reported.

Arm is a jewel of the UK technology industry. Its tech is found in most of the world’s smartphones and is pervasive across the electronics industry. The company is keeping its headquarters in Cambridge, England, for the time being and hasn’t ruled out the potential for a secondary listing in London down the road.

(Updates Intel shares and adds analyst comment.)