The upcoming listing of semiconductor technology firm Arm Holdings Ltd is supposed to be strong medicine for what has been ailing the U.S. IPO market, as well as provide a shot in the arm for Arm owner Softbank Group Corp.There is one complication, however. Almost a quarter of Arm's revenue comes from an
The upcoming listing of semiconductor technology firm Arm Holdings Ltd is supposed to be strong medicine for what has been ailing the U.S. IPO market, as well as provide a shot in the arm for Arm owner Softbank Group Corp.
Virtually all of that revenue comes from Arm China, an independent entity that has the exclusive rights to distribute Arm's technology in the country. That makes Arm China, not better-known names like Apple or Qualcomm, Arm's largest customer. And this customer has a history of late payments and presents"significant risks" to Arm's business, according to its filing.
Beyond these internal issues, U.S. sanctions limiting sales to China along with rising competition in the Chinese market cast doubt on Arm China's long-term trajectory.Arm China has posed ongoing challenges for SoftBank despite its strong early growth. The entity was established in 2018 when SoftBank sold a 51 per cent stake in Arm Ltd’s Chinese subsidiary, Arm Technology Co Ltd, to a group of Chinese investors led by private equity firm Hopu Investments.
However, analysts believe distribution of Arm's IP generates the majority of revenue. That business faces challenges from U.S. sanctions restricting sales of advanced technology to China, which Arm said had cost it at least $63 million in royalty revenue in its most recent fiscal year.
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