Hand Holdings (NASDAQ:), a subsidiary of the SoftBank group, intends to develop artificial intelligence chips, in line with CEO Masayoshi Son’s vision to transform the conglomerate into a leading artificial intelligence company.
According to an Asia Nikkei report, the company plans to set up a new artificial intelligence chip manufacturing division with the goal of producing a prototype by spring 2025 and beginning mass production by the fall of that year using contract manufacturers. The initiative is part of SoftBank’s (TYO:) ambitious 10 trillion yen ($64 billion) investment in artificial intelligence technology.
ARM shares rose 3.6% before the market opened Monday.
Arm currently dominates the smartphone processor architecture market with over 90% share. The company, largely owned by SoftBank with a 90% stake, will shoulder initial development costs, which are expected to be hundreds of billions of yen, the report said.
SoftBank will also contribute financially to this endeavor. There is a possibility that the AI chip business will be spun off into a separate entity under SoftBank once mass production starts.
“SBG’s interest in a seemingly fully vertically integrated supply chain – from intellectual property to computing, renewables and ultimately DC power – is bold,” Macquarie analysts commented in a note.
“This could potentially be seen as bypassing customers in the development of semi-finished products and their customers in the development of DC,” they added.
With Arm set to play a central role in SoftBank’s plan, Macquarie analysts believe the conglomerate’s ownership of the chipmaker will remain stable in the near term, with the potential for additional asset-backed financing to support data centers and renewable energy projects.
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They also note that Arm’s costs could fluctuate as the company develops a new product for production over the next 18 months.
“This could impact SBG shares if ARM shares are volatile. As for whether customers will use new products in a different direction from Arm, we believe this is unlikely given the dependence on Arm’s RISC architecture for mobile devices and the Internet of Things, or at least in the near future,” noted Macquarie team.
“We think other SBG port companies can now be monetized more quickly to generate cash to capitalize on this opportunity,” they added.
SoftBank is already in talks with Taiwan Semiconductor Manufacturer (TSM) and other companies to maintain production capacity. SoftBank also plans to set up data centers in the US, Europe, Asia and the Middle East by 2026 using these AI chips.
Given the significant amount of energy required to run these data centers, SoftBank also intends to build wind and solar power plants, as well as possibly fusion technology.