This week, Arm is initiated to trade on the Nasdaq, so investors are currently observing potential hazards for the firm. Although CNBC reports that it is not an immediate problem, Arm has cautioned that if it becomes successful, it could create a competitive risk. This other architecture is known as RISC-V, which is pronounced "risk five." RISC stands for Reduced Instruction Set Computer.
As Arm prepares for trading on the Nasdaq on Thursday, investors are weighing the potential benefits and risks of investing in the company. According to the British chip designer's IPO prospectus, it flagged a variety of hazards, such as its Chinese operations and geopolitics, but one possible danger has received significant attention. This hazard is called RISC-V, which is articulated as "risk five". This competing chip design has received endorsements from some of Arm's customers. Analysts stated to CNBC that it is not currently a pressing matter, yet Arm cautioned investors that it may become a competitive challenge if it gains more support.
In order to comprehend RISC-V, let us look into what Arm does. Arm devises an instruction set architecture (ISA) for processors, otherwise known as central processing units (CPUs). These processors can be viewed as the mind of an electronic device. Corporations, such as Apple and Qualcomm, use Arm's ISA as a foundation for constructing their own chips. Arm bill these organizations licensing charges in order for them to employ its technology. Additionally, when these processors are produced and included in the final devices, Arm obtains royalties. It is estimated that Arm's designs are utilized in almost all of the world's smartphones.
In contrast to RISC-V, which stands for reduced instruction set computer, the architecture is open source, meaning it is free to use. In its IPO prospectus, Arm noted that should RISC-V technology see sustained development, and market support increase, customers may opt for this free and open source option, instead of its own products.
In the last few years, the RISC-V architecture has garnered support from some of the largest tech firms worldwide, many of which also use Arm for their devices. Prominent amongst them are Google, Samsung, Qualcomm and Nvidia, who have collaborated for a consortium focused on developing RISC-V based technologies in 2020. As a result, Arm raised concern that this could ultimately lead to a legitimate alternative to its own architecture. In their IPO prospectus, Arm stated "The development of alternative architectures and technology is a time-consuming process, but if our competitors form alliances or consolidate with each other or third parties, such as the recently announced joint venture for RISC-V, they have access to increased resources which can help them create architecture and related tech to rival our own products".
The news of Nvidia's proposed acquisition of Arm for $40 billion in 2020 served to awaken the industry to the potential benefits of RISC-V, said Richard Windsor, founder of Radio Free Mobile. He highlighted worries from some players regarding the implications of Nvidia controlling Arm, an important customer for many of Nvidia's competitors. Windsor mentioned in an interview with CNBC that the proposition stirred up conflict in the industry, and some of Arm's clients are now beginning to consider alternative options. "It may be prudent for them to have a back-up supplier in case Arm suddenly starts acting against their interests," he noted.
It is broadly agreed that RISC-V is not a big challenge for Arm currently, primarily due to its lower quality. According to Peter Richardson, Research Director at Counterpoint Research, "RISC-V cannot match Arm's advanced designs. It is still far away from being at the apex, but it might be suitable for less sophisticated tasks."
Arm has experienced a lot of success due to its vast roster of major tech customers. This has enabled the Cambridge, UK-centered entity to develop an "ecosystem" based around its technology that is unrivaled by RISC-V technology. During an interview on CNBC's "Squawk Box Europe", Herman Hauser, founder of Acorn Computers, the originator of the first Arm chip, explained that "Whenever you devise software that runs on one Arm, it will run on all the others as well," further continuing that Arm will persist in maintaining its leading role. Nevertheless, fear exists that cheaper alternatives, like RISC-V, may become more attractive to Chinese companies if Arm were to elevate its prices. Cyrus Mewawalla, head of thematic intelligence at Global Data, predicted that China may potentially take advantage of the free version of RISC-V if Arm decides to increase its costs.
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