Why Softbank-ARM Deal A Big Boost For IoT?

softabnk_arm-deal-acquisitionLast week a deal was done in the international tech space and it was indeed a big ‘deal’. Japan’s Softbank announced to acquire Cambridge – U.K. based chip maker ARM Holdings for around $32 billion in one of the biggest deals in the recent past, the $67 billion EMC-Dell deal is the biggest in the close history.

This is Softbank’s largest ever acquisition, surpassing the Sprint acquisition in 2013 for $22 billion. When the Japanese firm bought Sprint, it was understandable – both are telecom operators and Softbank saw synergy in acquiring the U.S based telco to expand reach. But why would an MNO go for a pure chip maker, and that too in its biggest ever buy out?

Softbank feels the next paradigm shift in technology will come from technologies like the internet of things and Artificial intelligence – two areas where ARM has recently shifted its focus to.

“ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the ‘Internet of Things’,” said Masayoshi Son, Chairman and CEO of Softbank.

What Is There For Telcos?

There’s a message from this Softbank-ARM deal for global telecom operators. It shows a direction for the telecom operators worldwide that the future is IoT – internet of things and internet of everything. Few operators have read this message long back and others are getting ready now.

One of the pioneers amongst the telcos to realise the potential of IoT is Vodafone. As recent as last year, the company had joined hands with EMC to develop an industrial IoT framework in Ireland. Besides investment, the British telco is offering IoT solutions in all most all industry verticals and is among one of the pioneers that blended industrial IoT with consumer IoT.

Verizon too has bitten by the IoT bug. It’s simply because MNOs have started seeing the convergence of consumer industry with the industrial world. Connected car is a great example. Home automation is one more such example where the consumer IoT is blending with industrial IoT. Perhaps that’s why Verizon plans to acquire telematics company Telogis.

Softbank, on its part, is watching this development very closely. It offer telecom services on two biggest networks – on its own in Japan and Sprint in the U.S. Founder Son saw it coming that IoT is going to be the next future and telecom operators are going to be at the center of this ecosystem.

Chip Industry To Get a Boost

In 2015, around 95% of world’s smartphones carried chips made by ARM Holdings and the company sold more than 15 billion chips. Various reports have estimated there would be more than 25 billion connected devices in the next four years. What does it mean? More production of chips. The early perception that the Softbank-ARM deal would cost Intel and Qualcomm big time, in hindsight, it would boost their profitability. When more connected devices are in demand, ARM who just designs the processors and not manufacture it on its own, Intel and Qualcomm could grab these orders. The Softbank-ARM deal, in all probability, might turn out as a boon for the IoT industry.

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