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Samsung-Arm merger deal may be in the offing

Vice Chairman Lee Jae-yong said that SoftBank Group CEO Masayoshi Son will visit South Korea next month to talk about a potential partnership or a deal.

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According to reports South Korea tech giant Samsung has its eyes on the British chip designer as Samsung Electronics’ potential merger and acquisition target.

Samsung Electronics Vice Chairman Lee Jae-yong said that SoftBank Group CEO Masayoshi Son will visit South Korea next month to talk about a potential partnership or a deal.

“When he visits, he might have some offer (regarding an Arm deal). But I am not sure,” he told reporters upon arrival at Gimpo International Airport from his two-week business trip abroad, without elaborating further.

His final stop was in Britain, where the semiconductor and software design company is headquartered, reigniting long-running rumours that wealthy Samsung may be interested in purchasing Arm in order to strengthen its position as a top chipmaker and increase its competitiveness in a sector of growing strategic importance, according to the Yonhap news agency.

However, Lee claimed that throughout his trip to Britain, he did not encounter Arm executives.

“I want to discuss a strategic alliance for Arm with Samsung,” Son was quoted as saying by Bloomberg on Wednesday night, confirming Son’s planned visit to Seoul for the first time in three years.

Samsung has been eying a new M&A deal for years. At the CES 2022, Samsung Electronics Vice Chairman and co-CEO Han Jong-hee said the company was extensively reviewing M&A opportunities in various industries.

“We are moving faster than you might think. We are open to every possibility, and I think we can deliver good news sooner or later,” he said at that time.

The last major M&A deal of Samsung, the world’s largest memory chip and smartphone vendor, came in 2016, when it acquired U.S.-based Harman International Industries, specializing in connected car solutions, for US$8 billion.

Since then, rumours have been rampant, with Samsung executives reassuring the public that a deal is close at hand. However, there has been no update on that front.

Nvidia, one of the top chip firms in the world by market capitalization, and Softbank signed a massive $40 billion agreement in September 2020 to integrate Nvidia’s cutting-edge AI computing capabilities with the extensive Arm ecosystem.

According to a press statement from Nvidia, a merger would enable the two companies to “advance computing from the cloud, smartphones, PCs, self-driving cars and robotics, to edge IoT, and expand AI computing to every corner of the planet.”

In February, however, what would have been the biggest chip deal collapsed because of “significant regulatory challenges.”

Competition regulators in the U.S., EU, China and Britain had expressed concerns that the combination of the chip industry’s two major players could pose a major threat to fair competition.

Following the deal’s collapse, SoftBank, which acquired Arm in 2016, said it will, instead, take the chip company public by the end of next March.

Even if Samsung is interested in a potential deal, it would still face the same regulatory hurdle. And Samsung is not the only chipmaker attracted to Arm’s technology and IP licensing portfolio.

In March, Park Jung-ho, vice chairman and CEO of SK hynix Inc., the world’s second-largest memory chip maker, said the company was “reviewing a possibility of forming a consortium, together with strategic partners, to jointly acquire” Arm.

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

Qualcomm CEO Cristiano Amon also said in May his company was considering creating a consortium with rivals to buy a stake in Arm in order to maintain Arm’s neutrality, given its importance in the global chip ecosystem.

The possibility of Samsung acquiring Arm entirely on its own is “slim,” said Greg Roh, head of technology research at HMC Investment & Securities.

“Samsung is similar to Nvidia. It makes Arm-based system-on-chip (SoC) like Exynos. So the same antitrust rule will be likely applied to Samsung,” he said.

“But it is still a good thing for Samsung to put many options on the table, as it repeatedly said it was actively looking for deals.”

(inputs from IANS)