Arm’s Long-Term Strategic Dilemma
The British semiconductor design firm has a key and growing role in the global chip industry. But the growth strategy of Arm's Japanese owners risks laying the foundations for its future obsolescence.
With a market capitalization of about $120 billion as of August 2024, Arm Holdings plc is the most valuable semiconductor company in the United Kingdom and the second-most valuable in Europe after the Dutch ASML.1 In 2023, the Cambridge-based company had revenues of $3.2 billion and just over 7000 employees, mostly engineers, 3100 of whom were located in the UK, 1300 in the United States, and the rest spread across Europe and Asia.2 Arm designs central processing units (CPUs)—the computer chips that execute instructions from software and are the central component of any computing device—and widely licenses their designs through the ARM family of “instruction set architectures” (ISAs). An ISA is neither software nor hardware, but a standardized protocol for feeding software commands to a CPU, enabling compatibility of software across different CPUs. ARM is one of just two major ISAs used today, alongside Intel’s x86. Since Arm’s founding, over 280 billion chips have been manufactured using its architectures.3 Virtually all smartphones rely on chips using ARM.4 Since 2016, the company has been majority-owned by the Japanese conglomerate SoftBank.