Arm, the British chipmaker, has sounded the alarm on the impact of President Joe Biden’s trade war with China on its revenues. This concern surfaces as Arm announces its ambitious $70 billion (£54 billion) listing in New York. The escalating tensions between Beijing and Western nations are beginning to take a toll on business, and the situation might worsen as governments tighten restrictions on investments in advanced technologies like artificial intelligence.
Impacts on Arm’s Revenue Amid Geopolitical Tensions
Arm’s highly anticipated initial public offering (IPO) is in danger of being overshadowed by these geopolitical concerns. The company revealed in its 330-page IPO announcement that almost a quarter of its sales originate from China. This reliance makes Arm susceptible to the economic and political risks associated with the country.
Consequences of Trade Restrictions on Semiconductor Business
The Cambridge-based firm, owned by Japan’s SoftBank, specializes in semiconductor designs that power billions of smartphones and similar devices across the world. However, the semiconductor sector’s risks have surged due to President Biden’s imposition of sanctions targeting China’s access to cutting-edge computer chip technology.
Sales generated by divisions like Arm China plummeted by $28 million in the three months leading to June. Notably, a $12 million drop in royalty revenues was attributed to the trade protection and national security policies implemented by the United States, which affected China’s semiconductor suppliers and customers.
Challenges and Internal Rifts in China Market
Arm’s prospectus, released on Monday, further revealed potential internal challenges. Arm China operates as an independent entity partly owned by SoftBank, with the license to sell chip designs to local clients. Recent internal disputes in the Chinese arm of the company could present challenges. One such rift occurred when the local leader, Allen Wu, refused to step down after being dismissed in 2020.
Despite this turmoil, Wu’s eventual departure was resolved last year. However, Arm has alerted investors to possible tensions that could impact its relationship within China. The company stated that the absence or deterioration of this commercial relationship could significantly and negatively affect their competitiveness in the Chinese market.
Conclusion
The unveiling of Arm’s $70 billion listing in New York coincides with growing concerns over the escalating trade war between the United States and China. With nearly a quarter of its sales hailing from China, Arm finds itself at the forefront of economic and political uncertainties. As governments tighten restrictions on high-tech investments, the company’s future hangs in the balance, awaiting the resolution of both international conflicts and internal challenges.
