JY Vision 'ARM' M&A Possibility... Son Jeong-ui Also "Discussing with Samsung" (Comprehensive)

Samsung Electronics Vice Chairman Lee Jae-yong Returns from Latin America and Europe Trip
Possibility of Negotiations Next Month with ARM Major Shareholder Chairman Masayoshi Son

Samsung Electronics Vice Chairman Lee Jae-yong, returning from business trips to Latin America and Europe, arrived in Seoul at 5:50 p.m. on the 21st through the Seoul Gimpo Business Aviation Center (SGBAC) in Gangseo-gu and is answering questions from the press. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Samsung Electronics, the world's number one memory semiconductor company, is accelerating the realization of its vision to dominate the world in non-memory (system) semiconductors as well. Vice Chairman Lee Jae-yong is set to personally meet with Masayoshi Son, chairman of SoftBank and the largest shareholder of the global British fabless semiconductor design company ARM, next month to engage in merger and acquisition (M&A) negotiations, drawing significant attention. Chairman Son has also responded by saying he will visit Korea to discuss potential partnerships related to ARM under SoftBank and Samsung Electronics, attracting interest. Considering that ARM holds a 95% market share in the application processor (AP) segment, which acts as the brain of smartphones, it is expected that Samsung's system semiconductor business will gain momentum if the acquisition succeeds.

According to business circles on the 22nd, Vice Chairman Lee returned to Korea around 5:50 PM the previous day through the Seoul Gimpo Business Aviation Center (SGBAC) in Gangseo-gu, Seoul, after completing his business trips to Latin America and Europe. Among the 14-day trip schedule, the UK visit attracted the most attention, with expectations that the ARM M&A negotiations might have made significant progress.

When asked by reporters whether he had met with ARM executives and about the outcomes of new business, Vice Chairman Lee said, "I did not meet with ARM (executives)," but added, "Chairman Son will probably come to Seoul next month, and he might make an (M&A) proposal then, but I am not sure." Even interpreting Lee's remarks conservatively, the industry consensus is that he has secured an opportunity to negotiate M&A with ARM's largest shareholder. ARM is a company in which Chairman Son holds 75% and the Vision Fund holds 25% of the shares.

Bloomberg reported on the same day that Chairman Son also responded that he would visit Korea to discuss potential partnerships related to ARM under SoftBank and Samsung Electronics. This visit will mark his first trip to Korea in three years. A SoftBank spokesperson conveyed that Chairman Son said, "There are high expectations for this visit," and "We plan to discuss strategic cooperation between Samsung and ARM." Chairman Son has continuously stated that after his plan to sell ARM to the US semiconductor company Nvidia for $40 billion (approximately 56.37 trillion KRW) was blocked by US and UK competition authorities, he is prioritizing ARM's listing on the US Nasdaq.

Although ARM's corporate value has surged to around 100 trillion KRW and competition authorities in various countries are expected to impose significant scrutiny, the prevailing opinion is that the ARM M&A is a worthwhile opportunity for Samsung Electronics. It is also regarded as a deal that perfectly aligns with Samsung's proposed business direction. Earlier, in April 2019, Samsung Electronics announced 'System Semiconductor 2030,' aiming to become the world's number one in the system semiconductor sector by 2030. This strategy stems from a sense of urgency that the future is bleak without improving the business structure centered on system semiconductors.

If the deal is successful, it is expected to enable a business structure improvement focused on system semiconductors. Samsung has earned profits by manufacturing high-quality memory semiconductor components such as DRAM and NAND flash and supplying them to set (finished product) companies. However, if deals with set companies cease, there are limits to achieving high profitability. Samsung is now attempting to transition to a 'memory-centric computing' system. This means that memory semiconductor components not only enhance system processing speed but also serve as the 'central axis' responsible for computation and storage in devices like smartphones. The company aims to operate its business beyond merely 'tuning' finished products to becoming the finished products 'themselves.'

Samsung, which has the capability for mass production in foundry (semiconductor contract manufacturing) factories, would have the advantage of actively driving the system semiconductor business if it acquires the design capabilities of ARM, the world's largest semiconductor IP company. Considering that Samsung is number one in memory semiconductors but has lost major set companies like Apple to TSMC, the leader in the foundry sector, it is advised that Samsung needs to compete in the 'third market' of system semiconductors. Particularly, system semiconductor IP is divided into 'Intel-based' and 'ARM-based' categories, with ARM being relatively 'open source,' whereas Intel is known for never sharing confidential information. In summary, many experts believe that Samsung, even as a latecomer, must acquire ARM to secure a player position in the mobile and automotive (autonomous vehicle) system semiconductor markets.

Professor Kim Jeong-ho of the Department of Electrical and Electronic Engineering at KAIST said, "Since Samsung's mobile AP, Exynos, is also made based on the 'ARM architecture,' acquiring ARM shares would enhance Samsung's system semiconductor competitiveness and secure long-term growth momentum, making it a deal worth 'betting' on despite the approximately 100 trillion KRW corporate value." However, he also advised, "If possible, it would be worth considering forming a consortium with companies like Google and Microsoft (rather than ARM's competitor Intel) to make a limited investment of about 30 trillion KRW in shares."

This content was produced with the assistance of AI translation services.