Samsung, SoftBank Chiefs Set to Discuss Potential Partnership Involving Chip Designer Arm

It couldn’t be determined whether a Samsung-Arm partnership would entail an acquisition, partial sale or a pledge to work together on chip design or manufacturing. But any potential tie-up would pair Samsung, the world’s largest semiconductor company by revenue, with Arm, a maker of the world’s most ubiquitous chip-design blueprints.

The pairing would boost Samsung’s efforts to expand beyond its strength in memory chips by ramping up capabilities in areas such as logic-chip design where Arm excels. The South Korean tech giant is also one of the few companies able to manufacture the world’s most cutting-edge chips. Meanwhile, Japan’s SoftBank would see more options in selling Arm, for which it is now pursuing a public listing.

“I’m looking forward to visiting Korea for the first time in three years. I’d like to talk with Samsung about a strategic alliance with Arm,” Mr. Son said.

A SoftBank spokeswoman confirmed Mr. Son’s travel plans. A day earlier, Mr. Lee had told reporters at a Seoul airport that the SoftBank CEO might visit Seoul in October to discuss an offer regarding Arm. Mr. Lee had just returned from a trip to the U.K., where Arm is based, and had been asked about the prospect of merger talks with the chip-design firm. The Samsung chief said he hadn’t met with Arm executives during the trip, where he helped promote the South Korean city of Busan’s bid to host the World Expo in 2030.

Samsung didn’t have additional comment beyond Mr. Lee’s remarks.

The announcement by Mr. Son comes as SoftBank has been trying to spin off Arm for the past two years in a bid to raise cash from one of its most valuable holdings. After a planned $40 billion sale to

Nvidia Corp.

fell apart over regulatory concerns early this year, SoftBank pivoted to a plan for a public listing some time in 2023.

Still, demand for new IPOs has plummeted amid the broader rout in tech shares, making the prospect of a richly valued public listing more remote.

Internally at SoftBank, Mr. Son has made the listing of Arm a priority, pushing deputies to clean up and boost the business.

Arm, based in Cambridge, England, has hardly been the cash cow SoftBank hoped for when it bought the chip giant for $32 billion in 2016, as revenue barely budged for years. Recently, those fortunes have improved as new chip-licensing deals kicked in. Arm’s revenue in the fiscal year ending in March rose 35% over the prior year to $2.7 billion.

Arm occupies a vital spot in the global semiconductor ecosystem. Firms such as

Apple Inc.

and

Qualcomm Inc.

rely on its design architectures for microprocessor chips that power the world’s PCs, smartphones and data servers.

A Samsung-Arm partnership could help stabilize both firms during a pullback for a semiconductor industry that flourished during the pandemic but is now coming back down to earth. Global chip sales are expected to grow 13.9% to $633 billion this year, according to a recent forecast from trade group World Semiconductor Trade Statistics. That represents a pullback from an earlier projection for a 16.3% rise.

Next year, chip sales are now forecast to grow by 4.6%, a half of a percentage point lower than an earlier 5.1% projected increase, according to estimates from the trade group.

Beyond memory chips, Samsung operates a chip-design unit that mainly serves its own devices, such as its in-house Exynos mobile-application processor that goes inside some of the company’s smartphones. The South Korean firm also is making aggressive investments to improve its distant No. 2 position to

Taiwan Semiconductor Manufacturing Co.

in the contract chipmaking, or foundry, business.

The likelihood of Samsung buying all of Arm on its own is low, given antitrust concerns that thwarted Nvidia’s earlier takeover attempt, said

CW Chung,

head of Asia technology research at Nomura. “The more likely scenario is that Samsung could seek to buy a portion of Arm,” Mr. Chung said.

Another potential scenario is SoftBank first selling a partial stake in Arm to Samsung before pursuing an IPO for the chip-design firm, Mr. Chung added.

Samsung is sitting on net cash of 107.91 trillion won, the equivalent to roughly $76.6 billion, according to its most recent quarterly disclosures. That leaves the South Korean firm as one of the handful of chip giants able to swing a big acquisition.

But the South Korean tech company hasn’t pulled the trigger for a major deal since 2017, when it completed an $8 billion acquisition for the U.S.-based Harman International Industries Inc., an auto-tech manufacturer.

At an industry conference in September, Samsung co-CEO Han Jong-hee said that the company was “looking widely at M&A” and that it had achieved “lots of progress.”

Mr. Lee, who goes by

Jay Y. Lee

in the West, faces political and public pressure in South Korea to make a major business move. In August, Mr. Lee received a presidential pardon that wiped clean his criminal record from a 2017 bribery conviction—a decision underpinned by expectations that the business tycoon would help propel the nation’s economy.

Other big semiconductor firms have expressed public interest in purchasing a stake in Arm.

Intel Corp.

, Qualcomm and South Korean memory-chip maker

SK Hynix Inc.

have separately signaled desire this year in joining a consortium with partners to acquire Arm.

Megumi Fujikawa in Tokyo and Eliot Brown in London contributed to this article.

Write to Jiyoung Sohn at [email protected]