[Market Eye] Can Arm stake deal spur Samsung's breakthrough?

Samsung Electronics Vice Chairman Lee Jae-yong's planned meeting next month with SoftBank founder Masayoshi Son raises the expectation that the South Korean tech giant could find a breakthrough with a new round of investment for future growth in the field of semiconductors.

On his arrival to Seoul after a two-week trip overseas, the 54-year-old told reporters Wednesday afternoon that he is scheduled to hold talks with Son in Seoul and that he believes the Japanese tycoon might bring up the issue of the Arm deal while the two meet.

It was the first time that Lee has touched on the Arm issue publicly.

Unlike other chip industry players Qualcomm, Intel and SK hynix, Samsung had remained silent on the deal as executives refrained from giving a clear answer to whether the company was interested in buying a stake in the United Kingdom-based chip powerhouse.

But once the multibillion-dollar blockbuster deal crystalizes, market observers say that the new deal would likely be a boon to the semiconductor house, which makes memory chips and processors for integrated circuits and offers contract-based chip manufacturing.

Especially against the backdrop of the chip industry deflation and supply bottleneck in mobile processor business spearheaded by the Exynos brand, the deal could be a game changer, they added. Market tracker Semiconductor Intelligence on Wednesday estimated the semiconductor market would decline by 6 percent in 2023. IC Insights on Tuesday estimated the DRAM market -- a cash cow of Samsung's semiconductor unit -- to shrink 38 percent by September in a year, compared to a year before.

"The positive, long-term ripple effect of Samsung's Arm stake purchase will be immense," said Kim Jin-tae, a professor of electronics engineering at Konkuk University. "The deal completion will bring Korea's semiconductor design industry to the global level."

The surprising revelation about the meeting came as SoftBank is looking for ways to exit from Arm, primarily through a stock flotation.

Exiting from the chip juggernaut is key to a turnaround for the Japanese capitalist, as its declining value of investment due to inflation woes incurred a record loss of $23 billion in the second quarter.

The Cambridge, England-based Arm, which provides the mobile processor intellectual property used in 90 percent of the world's phones, was acquired by SoftBank for $32 billion in 2016. Its $40 billion deal to sell the stake to US graphic chip giant Nvidia collapsed earlier this year due to regulatory concerns.

Samsung is more likely to buy a small amount of stake, unlike Nvidia which had sought a controlling stake, other experts have suggested.

Samsung breaking its silence on the Arm deal comes at a critical juncture, as legal hurdles on Lee are being lifted for him to transition to the chairman position of the world's largest memory chipmaker, a role which has remained vacant since his father's retirement.

Samsung Electronics had 124 trillion won ($88 billion) in cash as of the second quarter, but there has not been a major M&A deal recently, as Lee has faced legal issues for the past five years. He was granted a presidential pardon in August.

While it is unclear if Son's Arm proposal would actually be on the table, a meeting between Lee and Son would at least provide a forum for the cash-rich Samsung to seek a growth engine.

The revelation of a meeting between Lee and Son signals "Samsung is shifting gears to find the group's new growth driver," according to Park Jea-gun, a professor of electronic engineering at Hanyang University.

"The two may also consider a joint investment for a new opportunity for mergers or acquisitions, considering SoftBank's track record in the M&A scene," Park added.