Jan 8, 2020 - Technology

Arm CEO: SoftBank deal lets us focus less on profit

The SoftBank Group logo.

Photo: CHARLY TRIBALLEAU/AFP via Getty Images

It's rare to hear a CEO talk proudly about bringing profit margins down, but Arm chief Simon Segars says that's just what his company's 2016 acquisition by SoftBank has allowed him to do.

Why it matters: Arm-based chips have found their way into nearly every smartphone. Freed from having to satisfy shareholders with hefty profits, Segars says that under SoftBank, Arm can focus on investing, in hopes of finding similar dominance in the cars and smart devices of the future.

For those not familiar, Arm doesn't make chips, but licenses its processor designs to companies like Qualcomm, Nvidia and Apple that use it as the starting point for their own chips. It was acquired for $32 billion by SoftBank in 2016.

As a public company, Segars said, Arm had roughly 50% percent operating margins. Now those margins are about 10%.

"I don't know of companies that do that successfully in public markets. It would be very hard."
— Segars, in an interview with Axios

It's not about making less money in the long term, of course, Segars said, but rather about investing so that it can gain a bigger foothold in areas like cars.

As Arm doesn't make the actual chips, most of that investment is in people. The company is now around 6,500 employees, up from 4,500 when it was acquired by SoftBank.

What's next: Segars said Arm is focused on the long-term impact 5G will have on businesses and in connecting all manner of devices, as well as making sure its designs are used throughout the connected car.

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