Recently, Japan’s SoftBank Group announced that it will acquire the struggling AI startup Graphcore for £400 million. This transaction still requires approval from the UK government to become effective.
Graphcore, founded in 2016, produces AI chips known as Intelligence Processing Units (IPUs), aiming to challenge Nvidia. Due to the high demand for Nvidia’s devices, investors poured funds into this startup, seeking viable alternatives to Nvidia. In 2020, Graphcore raised $222 million at a valuation of $2.8 billion, making it one of the UK’s most promising startups.
Despite this, Graphcore’s development has not been smooth. According to financial reports, Graphcore’s revenue for the entire year of 2022 was only $2.7 million, a 46% decline from the previous year’s $5 million, with losses expanding by 11% to $204.6 million. The losses were primarily due to increased operating costs, which mainly stemmed from investments in research and development. By the end of 2022, Graphcore still had $157 million in cash and short-term investments. Graphcore expects further losses in 2023 as it continues to invest in product development.
To control costs, Graphcore began layoffs in 2022, reducing its staff from 631 to 494 by the end of the year.
In October 2023, according to external media reports from The Register, Graphcore continued layoffs due to operational issues and closed its offices in Norway, Japan, and South Korea in September. The company must raise new funds from investors in the coming months to offset the increasing losses from the previous fiscal year and maintain “ongoing operations.”
In its latest annual report, Graphcore confirmed it has prepared a detailed cash flow forecast up to December 2027, indicating that the group will need further financing before achieving the planned cash flow breakeven point. The forecast suggests Graphcore will need more funds to meet current demands.
Chrysalis Investments Ltd., an investor in Graphcore, announced in December 2023 that it might sell its holdings in Graphcore. In its interim results released on June 28 of this year, Chrysalis stated that discussions regarding the “possible sale” were ongoing and “progressing well,” hoping to reach an agreement soon.
SoftBank Group is the largest shareholder of the UK semiconductor IP giant Arm. The acquisition of Graphcore appears to be aimed at further expanding its semiconductor portfolio and achieving synergies with Arm. However, SoftBank’s acquisition offer for Graphcore is significantly lower than the company’s overall valuation of over $2.7 billion when it raised $222 million at the end of 2020.
According to the UK’s National Security and Investment Act, SoftBank’s acquisition of Graphcore requires review by the UK government. Given that SoftBank holds a 90% stake in the British semiconductor giant Arm, this transaction is likely to be approved; otherwise, Graphcore may face bankruptcy.
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