$64 Billion Gamble: Softbank Arm Plan to Launch AI Chip in 2025

$64 Billion Gamble: Softbank Arm Plan to Launch AI Chip in 2025

Updated: May 12 2024 00:53

According to Japan Nikkei Asia, SoftBank Group subsidiary Arm has announced its entry into the development of AI chips, with plans to launch its first products in 2025. This ambitious venture is part of SoftBank Group CEO Masayoshi Son's staggering 10 trillion yen ($64 billion) investment strategy to transform the company into an AI powerhouse.

SoftBank's Vision: An AI-Driven Future

Masayoshi Son's vision for an AI revolution extends far beyond chips. He envisions a future where the latest advancements in AI, semiconductors, and robotics converge to drive innovation across various industries. SoftBank's ambitious plan includes investments in data centers, robots, and even power generation, with AI chips serving as the cornerstone of this transformative endeavor.

In his Softbank World 2023 presentation, he highlighted how AI is set to revolutionize various sectors, from self-driving vehicles and smart medical diagnostics to automated manufacturing and efficient supply chains.

Son outlined his ambitious goal to transform SoftBank Group into the world's foremost AI-powered conglomerate. Leveraging existing SoftBank’s established B2C base in telecommunications, e-commerce, and payment systems, which currently serves 40 million customers in Japan, he envisions SoftBank emerging as a B2B powerhouse. This includes capitalizing on ARM's global reach in edge computing, further enhancing SoftBank's influence in the AI domain.

To spearhead this new AI Chip initiative, Arm, in which SoftBank owns a 90% stake, will establish a dedicated AI chip division, aiming to create a prototype by spring 2025. The company, known for its dominance in smartphone processor architecture, will leverage its expertise to develop cutting-edge AI chips capable of processing vast amounts of data. Mass production, outsourced to contract manufacturers, is slated to commence in the fall of 2025. Once a mass-production system is established, the AI chip business could be spun off and placed under SoftBank.

The AI Chip Market: A Lucrative Opportunity

According to Precedence Research of Canada, the AI chip market is poised for explosive growth, with projections indicating a rise from $30 billion this year to over $200 billion by 2032.

Another research firm DataHorizzon Research even projected the AI Chip market to be 1,114.3 billion by 2032. NVIDIA plans to invest USD 200 million in Indonesia to design and build an AI center. It has partnered with Indosat Ooredoo Hutchison for this project. This will bolster telecommunications and enlarge the region's digital footprint in the coming years. While Nvidia currently dominates the field, the increasing demand presents a golden opportunity for new players like Arm. SoftBank's financial recovery and ample cash reserves provide the necessary firepower to pursue this ambitious venture.

To support the widespread adoption of its AI chips, SoftBank plans to construct data centers equipped with homegrown chips in the U.S., Europe, Asia, and the Middle East as early as 2026. Recognizing the immense power requirements of data centers, the company will also venture into power generation, exploring wind, solar, and even next-generation fusion technology.

Collaborations and Acquisitions: Building an AI Empire

SoftBank's AI strategy extends beyond internal development. The group has announced plans to establish a robotics joint venture with Alat, a unit of Saudi Arabia's sovereign wealth fund. Additionally, the company is actively pursuing mergers and acquisitions to bolster its AI capabilities. With a total investment expected to reach 10 trillion yen, including contributions from sovereign wealth funds and other investors, SoftBank is leaving no stone unturned in its quest for AI dominance.

SoftBank's foray into AI chips marks another chapter in the company's history of adapting to technological shifts. From its early days as an internet business through a joint venture with Yahoo to its acquisition of Vodafone and Sprint in the mobile era, SoftBank has consistently demonstrated its ability to pivot and capitalize on emerging trends. Now, with Masayoshi Son at the helm, the company is betting big on AI as the next frontier of innovation.

SoftBank and Saudi Arabia's $150M Robotics Venture

Alat, a company backed by $100 billion Saudi Arabia's Public Investment Fund (PIF), and Softbank will create an automated manufacturing hub to build next-generation industrial robots. This $150 million venture aims to radically transform the manufacturing industry in Saudi Arabia and beyond.

The heart of this ambitious project will be a fully automated manufacturing and engineering hub in Riyadh, set to serve both local and global demand. By leveraging intellectual property developed by SoftBank Group and its affiliates, the partners will build cutting-edge industrial robots that will set new standards in efficiency, precision, and sustainability.

This venture is a key part of Saudi Arabia's roadmap to launch fourth industrial revolution technologies by 2030, with the kingdom setting its sights on having 32,000 smart, sustainable factories up and running by 2035.

Another Softbank Investment: Boston Dynamics

Another Softbank robotics deal is Boston Dynamics. Back in 2017, SoftBank acquired Boston Dynamics, the company known for its impressive Parkour-capable robots, from Alphabet (Google's parent company). Fast forward to June 2021, around 4 years later, Hyundai Motor Group stepped in, finalizing a deal to acquire 80% interest in Boston Dynamics from SoftBank.

This powerhouse partnership aims to combine Hyundai's expertise in mobility with Boston Dynamics' cutting-edge robotics. The deal includes some interesting put option that requires Boston Dynamics to go IPO by June 2025, giving Softbank a chance to sell off its remaining 20% stake. Otherwise, Hyundai is required to buy the last 20% from Softbank by June 2026.

Risks and Rewards: The High-Stakes Game of AI Investment

While SoftBank's AI ambitions are undeniably impressive, the path ahead is not without risks. Massive investments in cutting-edge technologies come with inherent uncertainties, and Masayoshi Son's business acumen will be put to the test once again. However, if successful, SoftBank's Arm AI chip revolution could position the company at the forefront of the AI era, increasing the value of Arm investment significantly to future investors or buyers.

It is interesting to see all the big tech companies are developing their own AI chip. There is a recent rumor that Apple is moving to develop its own AI chips for data centers could have significant implications for the future of AI on Apple devices. By processing the most advanced AI tasks in the cloud, Apple can offload the heavy lifting from individual devices, allowing for more sophisticated AI features and better performance.

This approach also allows Apple to maintain tight control over the entire AI pipeline, from hardware to software, ensuring a consistent and secure experience for users. As AI becomes increasingly important in our daily lives, Apple's investment in AI-focused data centers could give the company a significant competitive advantage.

Apple's expertise in chip design, Microsoft's holistic approach to infrastructure optimization, and NVIDIA's cutting-edge GPU technology all contribute to the rapidly evolving AI landscape. As the world watches SoftBank's $64 billion gamble on AI unfold, one thing is certain: the stakes are high, but the potential rewards are immeasurable. With Arm's AI chip division leading the charge and Masayoshi Son's unwavering vision guiding the way, SoftBank is poised to make a significant impact on the global AI landscape. The question remains: will this bold move propel SoftBank to new heights, or will it be remembered as a cautionary tale of overreaching ambition? Only time will tell, but one thing is for sure—the AI revolution is upon us, and SoftBank is determined to be at its forefront.

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