Arm thrown into spotlight due to SK Group’s potential investment

Arm thrown into spotlight due to SK Group’s potential investment

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SEOUL — Arm Ltd. became the subject of attention among semiconductor producers in Asia and other regions after South Korea’s third-largest conglomerate, SK Group, floated the idea of acquiring the British semiconductor and software design company through a partnership with an unspecified company as part of a group-wide drive to expand its semiconductor business.

SK hynix, the world’s second-largest memory chip producer affiliated with SK Group, has posted a market notice forced by a series of rash remarks by CEO Park Jung-ho who said his company wants to acquire a stake in Arm or make joint investments with other companies. “We are continuously reviewing various strategic measures such as the joint acquisition of Arm to strengthen business competitiveness and enhance corporate value, but nothing has been fixed so far. We will make an announcement again within one month or when details are finalized,” the chipmaker said in a regulatory filing on March 31.

Park’s comment came after an attempt by American tech company Nvidia to buy Arm for $40 billion collapsed in February 2022 due to regulatory hurdles and competition concerns from tech companies such as Google and Microsoft. Intel CEO Patrick Paul Gelsinger also left open the possibility of joining a consortium to buy Arm.

Both Intel and SK hynix have expanded their investment, especially in foundry. Fabless manufacturing is the design and sale of hardware devices and semiconductor chips, while foundry companies are dedicated to manufacturing under consignment. The South Korean company took a more aggressive attitude after it signed a $9 billion deal to acquire Intel’s NAND memory and storage business In October 2020.

Arm, controlled by Japan’s SoftBank Group, creates and licenses its technology as intellectual property. Arm’s technology can bolster SK’s efforts to expand the lineup of artificial intelligence chips for data centers and autonomous driving. SK hynix and two other SK Group units launched an in-house alliance in January 2022 to establish a new U.S. entity for the global promotion of an AI chip called “SAPEON” targeting U.S-based big tech companies.

The SK alliance aims to unveil new services that have not existed before by adding advanced connected intelligence to autonomous driving, robots and urban air mobility. SK Telecom has led a state project to develop next-generation AI chips and interfaces that can be utilized for high-performance servers like cloud data centers.

In the global semiconductor market, the proposed acquisition of Arm can be seen as the direction of a new semiconductor alliance pushed by Biden who has prioritized domestic manufacturing as the COVID-19 pandemic exposed the fragility of a semiconductor supply chain. U.S. companies are strong in the system semiconductor sector. South Korea controls the global memory chip market, and Taiwan is a solid leader in foundry. China is struggling to build an independent semiconductor supply chain because Biden’s initiative could lead to a semiconductor supply chain involving companies in the U.S. and its allies.

The U.S.-led semiconductor alliance can have no constant support from South Korea because China accounts for 60 percent of the world’s semiconductor consumption. More than 20 percent of South Korean semiconductor sales come from China. 

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