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Key Apple suppliers approached for possible Arm sale

TSMC and Foxconn among those interested in SoftBank-owned chip designer

SoftBank bought U.K.-based chip company Arm for $32 billion in 2016. (Photo by Maho Obata)

HONG KONG/TAIPEI -- Key Apple suppliers including Taiwan Semiconductor Manufacturing Co. and Foxconn are among the companies showing interest in a possible investment in U.K.- based chip designer Arm Ltd., according to people familiar with the discussions.

Representatives of SoftBank Group, which bought Arm four years ago for $32 billion, and bankers have contacted several tech giants for a possible sale of Arm. In addition to TSMC, the world's biggest contract chipmaker, and Foxconn, the world's largest contract electronics manufacturer, these include Apple, Qualcomm, the leading mobile chip developer, and Nvidia, the biggest graphic processor chip developer, sources said.

Arm is a crucial player in the global tech industry, providing the chip blueprints used in more than 90% of the world's mobile chips. Apple, Qualcomm, Samsung, Huawei and almost all chip developers need Arm's intellectual property if they are designing processor chips for mobile devices.

Some companies, including TSMC, Foxconn and Nvidia, were given select financial data and projections prepared by Arm to evaluate a potential acquisition or investment, sources told the Nikkei Asian Review.

Two of those people said TSMC and Foxconn showed some interest, while Nvidia is in more advanced talks and wants to acquire Arm outright, rather than just picking up a large stake. Apple has evaluated it and stepped away, sources said. Samsung, meanwhile, has said reports that it was considering buying a small stake in Arm were "groundless," according to Reuters.

The Financial Times previously reported that Nvidia was in advanced talks with SoftBank to buy Arm in a deal that will be worth more than $32 billion. TSMC and Foxconn, which are more inclined to take a stake or, in the case of an acquisition, join a consortium, are monitoring how the talks with Nvidia evolve, sources said.

A sale of Arm is just one option being considered by SoftBank, which has also explored a relisting of the chipmaker as early as next year. Other alternatives include selling stakes to a group of investors or companies, the people said. SoftBank is also considering retaining a stake in the U.K. chip designer if it is sold or floated, the Nikkei reported earlier.

One person said that some bankers even talked to Chinese companies including Beijing-backed Semiconductor Manufacturing International Co., China's top contract chipmaker, though the chances of any transaction was negligible amid the escalating tensions between the U.S. and China.

"TSMC and Foxconn are closely monitoring how the talks between SoftBank and Nvidia progress," a source familiar with the deal said. "The two are still interested but are balking at a full acquisition."

TSMC studied Arm and its business model several years ago and is quite familiar with the U.K. company, another source with knowledge of the matter said.

"The company is always quite cautious in terms of big acquisitions and investments ... And in fact they also take into account whether the company could face strict regulatory reviews given the political climate currently," the person said. Another source close to the company said TSMC is not currently evaluating or looking into proceeding with any meaningful move.  

Arm's biggest client in China is Huawei Technologies, leaving the U.K. company in an awkward position when the smartphone maker was put on a U.S. trade blacklist in May 2019.

TSMC is likewise caught in the U.S.-China crossfire due to Washington's hostility toward Huawei, which is also one of its major customers. 

Arm and TSMC are longtime partners, together helping their customers test whether their latest manufacturing nanotechnology can be applied to mobile chips built using Arm's IP and infrastructure blueprints.

Foxconn, which owns chip design capabilities, is also evaluating a potential investment in Arm, sources said. The biggest iPhone assembler is aggressively looking for future growth drivers after seeing its third consecutive annual net profit decline in 2019.

Semiconductor technology is one of the three key areas that Foxconn aims to focus on in the next five years, Foxconn Chairman Young Liu has said.

It was not immediately clear if SoftBank founder Masayoshi Son has personally approached Foxconn. Son and Foxconn founder Terry Gou have been close friends for years and the Taiwanese tech giant is an investor in the Japanese company's Vision Fund. Son came to Taiwan last year for a forum hosted by Gou when the latter was running for the island's presidency. Son told reporters at the time that he planned to relist Arm in the next five years.

"Many tech industry bosses are being approached," another person familiar with the matter said. "SoftBank is eager to find new investors as they have their own financial issues and they want to do it as soon as possible. They of course don't want to face another write-down."

SoftBank's aggressive attempt to sell stakes in Arm comes as the Japanese titan faces its own financial troubles, including the hefty write-down of WeWork.

Arm, meanwhile, is locked in a bitter boardroom fight with its Chinese unit, which SoftBank gave up control of in 2018. Arm China took over all of Arm's operations and clients in China in April 2018, but is now openly feuding with its U.K. parent over management issues.

SoftBank and Arm declined to comment. 

TSMC said the company currently does not have any plan to invest in Arm, but did not respond to Nikkei's query on whether the chipmaker was approached by SoftBank.

Foxconn did not respond to requests for comment.

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