Three IoT lessons from the Softbank/ARM deal

Microchip

Cambridge was the scene of a takeover – don’t worry scholars, not by a visiting Oxford debating team, but a Japanese MNO. One of Japan’s leading telecoms operators, SoftBank, has acquired the Cambridge-based microprocessor company, ARM Holdings, for £23.4 billion. The news comes as a bit of a surprise given that the bulk of Softbank’s operations lie in the mobile market and not the Internet of Things. Most of the headlines have focused on whether the deal is good or bad news for the UK tech sector following the Brexit vote, but we think there are some key implications for MNOs, the IoT and even the industrial IoT, which need discussing.

1. The IoT is becoming more important for MNOs

SoftBank’s acquisition is a microcosm of operators’ shift towards the IoT. As we’ve discussed on the blog in our Connected Living series, the dream is an IoT where billions of powerful connected devices are available. Unsurprisingly, MNOs want to be at the centre of this growing ecosystem. Only last year, Vodafone teamed up with EMC to invest 2 million euros in developing an industrial IoT infrastructure in Cork. Verizon has also signaled its intentions by acquiring the telematics company, Telogis.

Make no mistake, these acquisitions aren’t experimental sub-projects – they are critical to telecoms operators’ growth strategies.  By positioning themselves as key IoT stakeholders, MNOs are aiming to provide smart connectivity to multiple consumer devices from a single master subscription.

2. Convergence

The IoT isn’t just going to revolutionize the consumer tech space. As Vodafone’s Head of IoT for Northern Europe, Cyril Deschanel, stated in an interview, “we are seeing the convergence between the consumer world and the industrial world” – a crucial factor in MNOs expanding into IoT. But what exactly does this mean?

Perhaps the best example of this phenomenon is the connected car. Let’s imagine you buy one. Of course, you expect to be able to listen to music saved on your phone or control your smart home devices while you’re driving. In order to do that, there needs to be an intersection between the car’s technology, developed by BMW or Volkswagen or Ford, and the tech in your house, built by Apple, Google or Microsoft. That’s where all ecosystem players want to play an important role, becoming the heartbeat of the IoT ecosystem.

SoftBank is no different – and by purchasing ARM, it’s acquiring the company which owns the intellectual property to the processors managing the enormous volumes of data. A very deliberate move…

3. Powerful processors will be crucial

20.6 billion connected devices are anticipated by 2020. As our Connected Living 2025 survey revealed, millennials are demanding a seamless and convenient service on their smartphones and wearables. Microprocessor companies like ARM Holdings are going to be critical in delivering the connectivity people expect in the digital age. Last year alone, around 15 billion ARM-based chips were shipped; to give a sense of perspective, it’s worth noting these processors power around 95% of all smartphones.  While ARM do not actually manufacture the chips, they own the intellectual property for the designs, making it an even more valuable investment for SoftBank.

All in all, the future looks bright for SoftBank and ARM Holdings. The combination of smartphones, billions of consumer and industrial connected devices demonstrates the huge business appeal the IoT is driving today. Clearly, SoftBank and ARM are building the foundations for tomorrow in terms of processing power and connectivity management. As partners of Gemalto, we wish them all the best in their new partnership.

What do you make of SoftBank’s acquisition of ARM Holdings? Let us know by tweeting to @GemaltoMobile, or by posting a comment below.

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