[Apple Shockwave](33) "A Dream Nurtured for 10 Years" Jobs Encouraged ARM Acquisition

Son Jeong-ui Requested Steve Jobs to Make a Smartphone Two Years Before iPhone Launch
Jobs Said "Crazy" but Gave Son Exclusive Japanese Sales Rights
Chairman Son: "Watched ARM for 10 Years After Talking with Jobs"

Editor's Note[Apple Shockwave] is a content series that explores the upheaval caused by Apple entering the semiconductor market. You might wonder, why semiconductors from Apple? Apple is no longer just a company that makes smartphones and computers. After long efforts starting from its founder, the late Steve Jobs, Apple has designed world-class semiconductors used in mobile devices. If Intel was the leader in the PC era, Apple has become the top predator in the mobile era semiconductor ecosystem. Amid the global semiconductor supply chain crisis and massive investments in semiconductor production facilities, we will carefully examine the upheaval and prospects in the semiconductor market brought about by Apple Silicon to broaden our readers' insights. Apple Shockwave will visit readers every Saturday. After more than 40 installments, it will be published as a book.

"I thought Jobs would never release a smartphone that looked like a toad. The only alternative was ARM." (Masayoshi Son, Chairman of Softbank)

Here is a man. A bold man who went to Steve Jobs, Apple’s founder, asking him to make a phone for himself. A man who, inspired by Jobs, dedicated his life to the semiconductor industry. He is a Korean-Japanese. Masayoshi Son, Chairman of Softbank.

Masayoshi Son (Son Masayoshi in Japanese), Chairman of Japan's SoftBank Group, is speaking at the shareholders' meeting held in Tokyo on June 21, 2023. He stated that the artificial intelligence (AI) revolution is occurring explosively.
[Image source=Yonhap News]

Chairman Son and Apple have a relationship like a crocodile and a crocodile bird. Son stood at the crossroads of Apple's path. The first choice was a great success, but subsequent choices were turbulent. Let’s follow Son’s dream, who wanted not only the iPhone but also the soul of the iPhone.

Son is known as a global venture capitalist, but since 2000, he has bet on the telecommunications business. Nowadays, the Vision Fund represents Softbank as a massive fund, but Softbank is a telecom company.

His investment business has had ups and downs. There were big hits like Alibaba, Coupang, Supercell, and Shanda, but also failures like WeWork. In that sense, the telecom business seemed like a reckless challenge.

Son entered the telecommunications business in 2006, following high-speed internet services in 2001. He acquired the Japanese subsidiary of Vodafone, a British telecom company that had been at the bottom in Japan for years. For a low-ranking telecom operator anywhere in the world to overturn the situation is like 'throwing eggs at rocks.' Even now, Softbank’s market share in Japan is about 20%, ranking third in the industry. However, Softbank’s ranking in the telecom industry is meaningless. In early 2020, Softbank surpassed Toyota to become the number one in market capitalization in Japan, symbolizing innovation.

Although losses from investments like WeWork lowered Son and Softbank’s status, it is undeniable that he introduced the iPhone to the Japanese telecom market, which was called 'Galapagos,' signaling the start of innovation.

How did Son secure the distribution rights for the iPhone? In 2014, Son revealed a surprising past about the emergence of the iPhone in a conversation with American journalist Charlie Rose.

One year before acquiring Vodafone, in 2005, two years before the iPhone’s release, Son met Jobs. He made a proposal that even Jobs did not expect. Son felt dissatisfied with Nokia, the world’s largest mobile phone company at the time. He needed an alternative. Son believed there was only one person on earth who could make the best device for the telecom business.

That person was Jobs. He judged that Apple, which dominated the MP3 player market with the iPod, was the right company to make a phone.

SoftBank Chairman Masayoshi Son (left) is smiling as he shares a story during an interview with American journalist Charlie Rose about how he was rejected when he tried to show Steve Jobs, Apple’s founder, the design draft of a smartphone he brought. Photo by Charlie Rose Website

Son defined Jobs as a 'modern Leonardo da Vinci' who could combine technology and art. Hesitation did not suit Son. He immediately called Jobs and said he would come to the U.S.

On the day they met, Son had design drafts that modified the iPod into a phone in his hand.

Son presented the design drafts to Jobs. These were the drafts that Son later described in an interview as looking like a toad.

"Masa, you don’t need to see that. We already have ours."

Jobs said he was already preparing the iPhone. Of course, even if Jobs had seen the design Son presented, he would not have liked it. Jobs, obsessed with minimal design, would naturally not have liked the pot-bellied toad-shaped design Son brought.

Son did not stop there.

"If Apple makes the phone and I run the telecom business, I want exclusive sales rights in Japan."

"You’re out of your mind, Masa. I haven’t told anyone this yet, but since you’re the first to come and ask, I’ll do it.""Then let’s sign the papers.""There’s no need for that."

Son asked for exclusive distribution rights in Japan if Apple made the smartphone and he ran the telecom business, and Jobs promised.

The conversation ended like this between Son, who asked for the iPhone without even having a telecom company, and Jobs, who promised to give the secret weapon iPhone.

Their conversation became reality. In 2006, Son invested about 20 trillion won to acquire Vodafone and launched Softbank Mobile. Jobs unveiled the iPhone in 2007. In 2008, Softbank and Apple signed an iPhone supply contract. The second iPhone model, the iPhone 3G, started selling in Japan in November 2008.

The iPhone became wildly popular in the Japanese market. The market, once dominated by Japanese companies’ phones sold only in Japan, was cracked. The iPhone swept the Japanese smartphone market.

Son Dreams of ARM While Watching the iPhone

Son’s sprint did not end here. This time, he targeted the U.S. telecom market. In 2013, Softbank acquired Sprint, the third-largest U.S. telecom company, for $21.6 billion. Although NTT Docomo dominates Japan and Verizon dominates the U.S. telecom markets, Son did not hesitate.

Softbank’s entry into the U.S. telecom market had another meaning. Now, through Sprint, Softbank also distributed the iPhone in the U.S. Son aimed to dominate the U.S. telecom market by merging Sprint with T-Mobile.

Son later faced difficulties in the U.S. telecom market. Meanwhile, he dreamed another dream.

After meeting Jobs, Son’s true goal was one: semiconductors. Although he acquired telecom companies, he watched semiconductors for 10 years. Seeing through the flow of technological change, he wanted the chip that controls the semiconductors used by all smartphones worldwide. Not CPUs for computers, but low-power chips for mobile. The goal was one: the British company ARM.

Son thought that Jobs would never use Intel’s chips, which consumed a lot of battery, after meeting him. He judged that the only alternative was ARM. Incidentally, Google also chose ARM as the design base for chips for the Android operating system.

Although the decision was made, execution was difficult. After paying off the acquisition funds for Softbank Mobile, he tried to enter the U.S. telecom market. He had no investment capacity. ARM remained a potential investment target.

Ten years after meeting Jobs, in 2016, the time for a decisive move came. Compared to when Son first talked with Jobs, ARM’s valuation had risen tenfold. Although he regretted not investing earlier, he thought now was the cheapest time and paid a 40% premium on the stock price. A huge sum of $40 billion was invested.

Son’s ambition was great. ARM’s designs are the source of SoCs, the heart of mobile devices. It was practically a decision to bring all smartphones under his influence. Although he did not develop the iPhone himself, he had a grand plan to seize its source with the power of money.

Son explained his ARM investment as follows.

"What matters to me is not art but the information revolution."

Son clearly defined the difference between Jobs and himself. If Jobs fused technology and art, Son judged himself as someone who fuses finance and technology.

After ARM’s failed sale to Nvidia, it recently attracted attention through a U.S. stock market listing. However, compared to the scale of investment, Son’s achievements are still limited. What did Son miss?