Arm Holdings Initiates “Highway Robbery” Deal with Malaysia Worth $250 Million…

Mayoshi Son’s desperate attempt at keeping up with that “dog” mentality Jensen Huang has (read: Arm Holdings), has just secured a $250 million payday from Malaysia—proving once again that in today's semiconductor wars, intellectual property is king. The best part? It all involves a quick handing over of its precious chip blueprints to Malaysia’s government. Easy. 

(Source: Giphy) 

In short, Malaysia has spent decades as the packaging and testing backup dancer for the semiconductor industry. Now Economy Minister Rafizi Ramli wants to join the headliners with what he calls a "radical approach" to building a chip ecosystem. "We have always wanted to move from the back-end -- which is on testing and assembly -- to the front-end," Rafizi explained, conveniently skipping over the brutal economics of the situation. 

However, the issue here (other than failing to have the tech capable of telling us where in the hell Malaysia Flight 370 is) is that the Southeast Asian nation currently packages about 10% of the world's chips—the low-margin, labor-intensive part of the process. Companies like Intel, GlobalFoundries, and Infineon have all set up sweat shops in Malaysia while keeping the high-value design work elsewhere. 

(Source: Reuters) 

Plus, when you factor in that Microsoft, Nvidia, Google, and China’s ByteDance have all dumped billions into Malaysian data centers—giving the country all the server heat without any intellectual capital, it’s understandable as to why Malaysia is fed up with getting the short end of the stick. Which is why, Malaysia now has a plan to stick it to the man, and back up their own brinks truck. 

Simply put, the government is targeting semiconductor exports of 1.2 trillion ringgit ($270 billion) by 2030. For context, that's more than Intel's annual revenue. Ambitious? Sure. Delusional? Probably. However, Rafizi believes this Arm deal will spawn 10 Malaysian chip companies with $20 billion in combined annual revenue and add a full percentage point to Malaysia's GDP. The math checks out if you don't think about it too hard LOL. But that’s about where the easy stops. 

(Source: Bloomberg) 

Especially since designing competitive chips requires billions in R&D, experienced talent, and ecosystem connections. Which is why Malaysia's counting on seven licensed blueprints to overcome these minor obstacles. Bold strategy, Cotton, let’s see if it pays off for ‘em. 

For Arm though, this is pure profit. The SoftBank-owned firm gets quarter-billion over a decade for essentially emailing some files and opening an office in Kuala Lumpur. Talk about high margins. Not to mention the fact that Arm's first Southeast Asian office will conveniently position them to sell more licenses to other aspirational countries in the region. Vietnam, Indonesia, and Thailand are presumably next on the sales call list. Scaling the business model of selling national semiconductor dreams at $250 million a pop. Genius.

(Source: Giphy) 

But, but, but… still, the brutal reality is that competing with Taiwan, South Korea, and the US in advanced chip design isn't something you achieve with a $250 million licensing deal. But in today's overheated semiconductor market, even questionable national strategies get attention. Perhaps Malaysia will surprise us all and become the next Taiwan. More likely, they'll be calling Arm in 2027 asking for an extension on their homework. Either way, SoftBank's shareholders are smiling all the way to the bank—for now.

So yeah, keep an eye on Arm Holdings as this deal continues to make headlines and place your bets accordingly, friends. As always, stay safe and stay frosty! Until next time… 

P.S. $1.4 million, $1.02 million, and $6.715 million—these aren’t lottery winnings or Miami real estate prices… they’re all insider transactions that have gone down in the last week while retail investors were busy panic-selling everything. Want to track these corporate fat cats in real-time so you can pretend you're also an executive with material nonpublic information? (Legally, of course.) Click here to join Stocks.News premium while you still can…

Stocks.News holds positions in Intel, Microsoft, and Google as mentioned in the article.