[ChipTalk] Arm, the 'Secret Semiconductor Weapon' at the Center of the AI War

Arm's Architecture Used by Most Tech Giants
Also Joining the 'Samsung Electronics, SoftBank, OpenAI Meeting'
Son Jeong-ui's Secret Weapon: Will It Become the Key for Samsung?

"In terms of Baduk, it was like looking 50 moves ahead and making the biggest bet of my life."

Son Jeong-ui, chairman of SoftBank, said this in July 2016 when he acquired 'this company' for $32 billion. Less than ten years later, the company's market capitalization is approaching $160 billion. This company, which the tech industry's 'big player' foresaw the future of, is the British semiconductor intellectual property (IP) company Arm.

In September 2023, Rene Haas, CEO of Arm, rang the opening bell at the Nasdaq market in New York, USA. Arm successfully raised approximately 5 billion dollars through its initial public offering (IPO). Photo by Reuters Yonhap News

Earlier this month, Sam Altman, CEO of OpenAI and the father of ChatGPT, visited Korea, fueling the AI issue. This visit came right after the emergence of China's DeepSeek, and with Son Jeong-ui's secret entry, expectations grew for a 'Korea-US-Japan AI alliance' to counter China.

At that time, the business world’s attention was focused on the 'three-way meeting' between Samsung Electronics Chairman Lee Jae-yong, CEO Altman, and Chairman Son. Various speculations arose about whether this could be a new opportunity for Samsung Electronics, which has been struggling due to the semiconductor market downturn. It is worth noting that Arm, the key to the Stargate project, was also part of this '3+1 meeting.'

Arm is a chipless company that designs semiconductor architecture, established in November 1990. Arm's architecture is gaining attention in the emerging semiconductor industry for its low power design and high scalability. 90% of the world's smartphones are based on Arm's blueprints, and major tech companies such as Apple, Samsung, Qualcomm, and Nvidia develop semiconductors using Arm's technology.

Arm is a subsidiary of SoftBank, which owns 90% of its shares. In July 2020, four years after the acquisition, SoftBank, facing its worst losses, put Arm on the market. Nvidia attempted to acquire it, and it is known that Arm's internal management, feeling a crisis, actively pushed for the sale.

The acquisition ultimately fell through, but the situation reversed with the emergence of ChatGPT in November 2022. Chairman Son decided to list Arm on NASDAQ in September 2023 instead of selling it. The key figure in successfully leading the IPO was Ren? Haas, Arm's CEO. He is the '1' in the '3+1 meeting.'

From Almost Being Sold to Going Public... Revival Through AI Advancement

Arm's market capitalization, which was $62 billion at the time of its NASDAQ listing, has more than doubled to $158.8 billion as of the 1st of this month. Although there have been fluctuations, the overall trend is upward. However, compared to the market caps of Apple and Qualcomm, which produce products based on Arm's blueprints, this may not be satisfactory.

Perhaps because of this, Arm began to change after the listing. In October last year, it filed a lawsuit against its largest customer, Qualcomm. Qualcomm had started developing Arm-based CPUs after acquiring Nuvia. Arm took issue with this, stating that Nuvia could not use the existing license contract without permission and that a new contract must be signed. Along with the lawsuit, Arm also declared it would no longer provide semiconductor design IP to fabless companies, a move unprecedentedly targeting a specific customer.

As the legal battle intensified, documents revealing Arm's future plans were leaked. Qualcomm claimed that Arm was preparing to 'directly' design chips and compete with customers. This meant not just drawing blueprints but entering the battlefield to compete with Apple, Samsung, Qualcomm, and others.

CEO Haas denied this, but Arm is indeed rapidly expanding its business territory. With the increasing share of AI PCs, demand for low-power chips has surged, and high-performance low-power technology is gaining attention in the extended reality (XR) field. The autonomous driving era has also made the finished car market a new opportunity.

According to industry sources, Arm secured Meta as its first customer and plans to unveil its first self-designed chip this summer. It appears to be moving away from the traditional licensing business model to directly design chips to expand its influence in the AI semiconductor market. Production is planned to be outsourced to foundries such as TSMC. As Arm develops chips directly, the possibility of competition with existing customers has increased.

Will Samsung Electronics and Arm Draw a New Future?

Arm is also part of the Stargate project and plays a key role in the AI ecosystem that the US is envisioning. It is expected to play an important role in the Korea-US-Japan AI alliance, especially in Samsung Electronics' future.

Industry insiders mention a scenario where Samsung Electronics invests partially in the Stargate project in exchange for adopting Samsung's technology at OpenAI and Arm. Simply put, Arm designs the blueprints, OpenAI develops AI accelerators, and Samsung Electronics handles production. OpenAI is developing chips based on Arm's designs but lacks manufacturing plants. The leading foundry TSMC is already stretched producing Nvidia chips. Samsung Electronics is the world's largest memory producer and also has foundries capable of producing AI chips.

The presence of Samsung Electronics' DS Division head Jeong-yeong Hyun and Arm CEO Haas at the '3+1 meeting' is interpreted as a purpose to coordinate specific collaboration plans. CEO Haas praised, "Samsung's foundry division is an excellent partner," and added, "Korea has outstanding AI engineers, so the future is bright."