SoftBank Acquires UK AI Chip Firm Graphcore
SoftBank Group has announced the acquisition of Graphcore Ltd., a UK-based semiconductor startup facing financial challenges. This move aligns with SoftBank's strategic focus on enhancing investments in semiconductor technology and artificial intelligence (AI). Graphcore, once positioned as a significant rival to industry leader Nvidia, saw its market value surge amid rising demand for AI chips. However, the company has struggled to secure necessary investments critical for competitive positioning.
The transaction details, though undisclosed officially, are estimated around $500 million, marking SoftBank's second major acquisition in the UK semiconductor sector following its purchase of Arm in 2016. Arm, renowned for its chip designs integral to global smartphone technology, has been pivotal in SoftBank's semiconductor portfolio.
Based in Bristol, Graphcore specializes in designing Intelligence Processing Units (IPUs) tailored for AI applications. Despite raising $2.8 billion from prominent investors such as Sequoia Capital, the company has faced challenges in converting investments into market share, especially against dominant competitors like Nvidia.
Financial disclosures reveal that Graphcore reported $2.7 million in revenue for 2022, with significant operational losses amounting to $204.6 million. As of late 2020, the company held a valuation of $2.77 billion. In response to financial pressures, Graphcore underwent restructuring, including a workforce reduction of 20% to 494 employees and closure of operations in Norway, Japan, and South Korea in an effort to stabilize finances. The company also exited the Chinese market in 2023, despite earlier optimism regarding its potential.
Nigel Toon, CEO of Graphcore, highlighted the substantial costs associated with competing in the AI chip market, emphasizing the need for strategic investments to achieve sustainable growth. SoftBank's strategic approach includes plans to expand Graphcore's operations in the UK, positioning the company for enhanced global competitiveness.
Vikas Parekh, Managing Partner at SoftBank Investment Advisers, expressed optimism about the partnership with Graphcore, underscoring ambitions to advance toward Artificial General Intelligence (AGI), where machines outperform humans across various tasks.
Toon acknowledged the challenges ahead while expressing confidence that SoftBank's backing would provide Graphcore with the necessary resources to strengthen its market position globally. SoftBank founder Masayoshi Son has redirected focus from high-profile venture deals to strategic investments in AI and semiconductors, leveraging the success of Arm's public listing.
Toon indicated that Graphcore would collaborate extensively within the SoftBank ecosystem, without specifying integration plans with Arm. Earlier communications to former employees indicated that their company stock would not yield profits following the acquisition, underscoring discrepancies between investment capital raised and the acquisition offer.
Toon confirmed that Graphcore had raised approximately $700 million before the acquisition, reflecting earlier financial milestones in its growth trajectory.
