The Circuit Episode 31: The Arm F1 and Pending IPO
Aug 28, 2023
The lack of coverage surrounding the Arm F1 IPO and its relation to semiconductors is discussed. Concerns about revenue concentration in China are explored, along with the challenges of ranking customers. The ArmChina joint venture and potential risks are analyzed. The decline in revenue and the importance of financial diversity are highlighted. The growth prospects of ARM and their changing business model are discussed, including valuation, involvement in consumer electronics, and attracting new customers.
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SoftBank Uses IPO To Exit Quickly
- Arm's IPO filing reads like SoftBank trying to extract maximum cash rather than showcase long-term company strategy.
- Ben Bajarin warns this creates governance and growth risks that investors should watch closely.
Revenue Is Highly Concentrated
- ARM's revenue remains highly concentrated in mobile and a handful of customers, raising growth and litigation exposure.
- Ben Bajarin highlights China and five large customers as clear concentration risks.
Royalties Average Only Eleven Cents Per Chip
- ARM earned on average $0.11 per chip across ~30 billion chips shipped last year, showing extremely low per-unit monetization.
- Jay Goldberg notes this is improved from a few cents but highlights the scale gap between shipments and royalties.