SoftBank Group Corp.: FY24Q1 Global Conference Call Q&A
August 7, 2024
Presenters:
Yoshimitsu Goto, Board Director, Corporate Officer, Senior Vice President, CFO & CISO, Head of Finance
Unit & Administration Unit
Kazuko Kimiwada, Corporate Officer, Senior Vice President, Head of Accounting Unit
Alex Clavel, Co-CEO, SB Investment Advisers, CEO, SB Global Advisers
Navneet Govil, CFO, SB Investment Advisers & SB Global Advisers
Ian Thornton, Vice President, Investor Relations, Arm Holdings plc
Q&A
Speaker1
Q1:
The question is related to T-Mobile and Deutsche Telekom. Are those still considered strategic assets?
A1:(Goto) We think the same way about all our holdings.
Q2:
Is there a potential that you sell those assets? You sold a little bit of T-Mobile shares, but is there morecoming up?
A2:(Goto) As a general answer, we are an investment company, so the sale of our holdings is always considereda return on investment, with the proceeds being used for new investments or other purposes. We do notcomment on the question of whether to sell individual listed stocks.
Q3:
I have a question related to Arm's customer base. Arm is now selling designs to 10 different hyperscalers. Is
my understanding correct?
A3:(Thornton) All 10 are either developing or deploying Arm-based chips into the data center. For example,
Oracle is deploying chips developed by Ampere. So, Ampere Computing is the customer, and Oracle is thecustomer of Ampere. Whereas Amazon, Google, and Microsoft are our customers, and they are developing
their own chips for their own data center.
And if you were to go through the 10, there is a mix there. Most of them are developing for their own data1

center, but some are also buying off-the-shelf chips as well.
Q4:
If you look at that market of companies that are designing their own chips using Arm designs, how much ofthat market do you think you have and how much do you think you can get? Is there a lot of opportunity
still available there?
A4:(Thornton) In terms of our market share in the data center, the server side, and the cloud and hyperscalers,
we have about a 15% market share today. But almost all of that is just from Amazon AWS. Google have only
just started shipping their Axion chip. Microsoft has only just started shipping their Cobalt chip into Azure.
So, there are lots of opportunities for those companies to come up to providing a similar level of penetrationas Amazon have done.
Plus, you then look at all the other potential hyperscalers that are out there as well, and that are beginningto deploy Arm-based chips or soon will be. And so, when we are staring into our crystal ball and trying toforecast the future, we think that on the cloud side of the data center business we could be approaching a
50% market share by the end of the decade.
Speaker 2
Q1:
I have a question about Wiz. Could you tell us a little bit more on this investment? I think this company was
thinking of selling themselves to Google, but decided not to. And then do they have a new relationship with
SVF?
A1:
(Clavel) Wiz is an investment that we would have made in April. There was no linkage between whatever
the rumors that were out there that the company then confirmed and our investment. These are two totally
separate things. Our investment went in a few months before the Google stories came out. From ourperspective, it was validation, as the company's CEO said, that they would receive such a humbling offer. It
was a growth investment for us in what we think is a great company.
Q2:
Could I ask about your thoughts on BoJ? Many people were surprised by their action and then the comments
seem to be trying to calm down the market. What was your sense of their thinking, and how could that
impact your funding situation in Japan?
A2:(Goto) I am not a critic specializing in BoJ matters, so I will not comment in detail. However, I believe BoJ
was seeking the right moment to end the stance that has been in place for many years. If the impact was
expected to be larger than anticipated, they would need to make statements to mitigate it somewhat. It
2appears that such measures have been taken in this short period.
At the moment, I don't believe this has any direct impact on our procurement. Regarding our debt,
observing the secondary and CDS levels of the bonds provides a general understanding of the situation.
Speaker 3
Q1:
I have a question on Arm. You mentioned a December forecast of some reacceleration and a rebound inchip sales. Could you speak to what segment is driving that across your various market share breakdowns,
just given the disparity in or, the opportunity in royalty rate upside from smartphone relative to others, it
seems at the moment given the Armv9 penetration?
A1:(Thornton) I was very much focusing on the industrial IoT network equipment and PC space, which havebeen seeing a bit of a slowdown over the last year or 18 months. And our customers in this space have been
saying that this is the bottom and that it is now going to start to take off again.
This quarter was supposed to be the bottom. And now it is the December quarter that is supposed to be
the bottom, at which point we start to see growth again.
Q2:
To what extent do we see the higher royalty IP being used in the industrial IoT network equipment and PC
space, relative to what seems to be a highly penetrated space for smartphone, for Armv9?
A2:(Thornton) Armv9 is only about halfway through smartphone, so you have got plenty to go. All of the main
chips going into the data center, cloud data center is now Armv9-based. We are starting to see the first going
into automotive being Armv9-based as well.
Today, we are not seeing any Armv9 in industrial IoT. We are not seeing any in PC today either. And a verysmall number of chips is going into networking. So broadly, these are mainly Armv8 or older architectures,
but we do expect that in all three of these areas, Armv9 will become a very large part over time, maybe notindustrial IoT to the same extent. Certainly, most of the networking equipment over the next four to five
years will probably move to Armv9, and much of our PC penetration will be Armv9- based as well in four orfive years.
Q3:
In terms of Son-san's vision for this broader ecosystem around AI and data centers and renewables, I would
like to get your view on how we should think about the spread of this capital, the extent to which we could
see SBG, portfolio companies, and wholly consolidated subsidiaries funding this ecosystem over time.
A3:(Goto) If it is power generation, SB Energy will likely be the direct business entity involved. In the case of a3

data center, it is highly likely that a subsidiary will be established. SBG is always prepared to provide thenecessary funding to such a subsidiary.
However, whether it’s for power generation or data centers, we will likely form syndicates and gather
financing participants for each project. Consequently, the amount of capital we contribute as equity
investors to the overall required funding is expected to be not that large.
Speaker 4
Q1:
Mechanically, given so much of your debt are in yen, and your assets are in dollars, as the yen continues tostrengthen, we would expect LTV to weaken. Do you have any hedges in place to help manage that risk?
A1:(Goto) In terms of the impact of exchange rates, our outstanding bonds have fixed interest rates, and since
we are a Japanese company, there is little effect on payments made in yen. When considering new financing
through foreign bonds, the principal amount at redemption may fluctuate depending on exchange rates,
though I do not anticipate this impact being significant.
Regarding Loan to Value, we have substantial leeway, so I do not think that exchange rate fluctuations will
have a significant impact at all. For example, even if there were an event causing share prices to drop by
one-third over a few weeks, it only affects Loan to Value by less than 2%, so we consider the current Loan
to Value level to be safe.
Speaker 5
Q1:
Will there be any change in the mechanism of buyback compared to the last time? In 2021 when you
announced, I believe it was a ¥1 trillion buyback, what happened was that buyback led to a sharp rise in theshare price and most of the buyback happened at a high price. And then the share price crashed. So, areyou contemplating a different mechanism for the buyback this time?
In addition, is it fair to assume that this buyback will be funded by a combination of asset sales and new
debt?
A1:
(Goto) There is absolutely no difference in the mechanism or treatment of this buyback compared toprevious cases we have executed. The decision for this buyback was made in line with its intended purpose.
Additionally, SBG's current liquidity is very ample, so we are not planning this buyback in conjunction withasset sales. We do not comment on the share buyback method.
Speaker 6
Q1:
The question is on PayPay. The target was for PayPay to be profitable. Now it is profitable. Does SVF want to
see PayPay IPO soon? Is it one of the targets they think will be monetized soon, from their point of view,
4given your own 30%? Given the fintech write down in the quarter, are you more cautious about fintech IPOs
in the short term?
A1:(Govil) PayPay has done quite well. They grew revenues 25% year-over-year through fiscal year 2024
through March 2024. They have achieved EBITDA break-even, the margins are increased by 3.5%, and they
have forecasted to continue profitability into 2025 and beyond. PayPay Card now as well integrated andoffering seamless products across payments, point, and credit.
In terms of IPOs, we do not dictate the timing of the IPOs or the exits. There is no pressure to exit. SVF haslong fund lives. Our approach is that all the management companies of the various portfolio companies
would make the decision of when to go public. They typically do that when the markets are favorable.
The good news is that in most cases including PayPay, they are profitable and so there is no need to raisemoney. It is not driven by a need to have a funding round or some kind of a way to raise money. It will reallydepend on whenever management is comfortable taking the company public.
Q2:
In this quarter, SVF1 posted private fair value gains of $1.4 billion. It seems to be mostly by ByteDance.
Raising the valuation of ByteDance seems to be counter to the threat against the business. Does litigation
come into the process of reviewing the valuation? The U.S. government has legislated to potentially ban the
product of TikTok in the U.S. Obviously, the company is countersuing to say that it is nonconstitutional. I wasjust surprised that you would increase your valuation. I presume then that you do not include the threat ofany litigation and or termination of TikTok in the U.S. when considering the valuation of ByteDance.
A2:(Govil) The litigation and the valuation are two separate things. In 2023, their revenue was about $120
billion, and growth accelerated to over 40%. If you compare how they are doing to some of the other players,
they grew revenues in calendar year 2023 by 50%, compared to 16% for Meta, 10% for Tencent. In terms of
their EBITDA margins as well, they are very strong. EBITDA margins are over 35%. A lot of this is driven by
their China business. They are highly cash generative. What we are seeing is really, really strong performancein their China business. And effectively, what we have done is, from a valuation standpoint, we have taken
into account the potential risk as the litigation risk, and we have concluded that even if we fully disregard
the TikTok contribution in the U.S., the valuation uplift would be warranted.
Q3:
Regarding the private losses for SVF2, it was due to fintech and SaaS. Could you elaborate a little more onwhat the driver was behind?
A3:(Govil) In the fintech industry, there has been a rerating of the multiples, and you can look at a lot of thesein terms of the public comps. In general, fintech public comps saw a 20% to 30% rerating quarter over5

quarter. These are companies like Block, Affirm, Wise, and Adyen. And many of these are trading at historicallows. Avnd it is really driven by the high interest environment and uncertainty around the timing of interest
rate cuts. We are also seeing early signs of consumer weakening, especially in discretionary categories.
On the software side, I think a lot of it is driven by some poor consumer sentiment data that we are seeing,
and that had an impact.
Speaker 7
Q1:
I have a question on IPUs (Intelligence Processing Units). The data center market is doing very well, and thathas been a key target for you. Could you share your perspective on how IPUs work as a market, and in termsof Arm's business model, to what degree you overlap or have ever thought about that space?
A1:(Thornton) In terms of the broader market, all of the accelerators, including GPUs, NPUs, and any form ofaccelerator for AI or even for other data center tasks, sit alongside a CPU. The CPU provides the interface
into the accelerator, and these accelerators are usually very difficult to program. So, you have a nice easy
programming interface in the CPU, and then the CPU runs the operating system, runs the application, andthen hands off tasks to the accelerator, which the accelerator is tuned to do.
When looking at data centers full of Nvidia GPU's, Google TPUs, or other forms of accelerators, you will finda large number of CPU chips there as well.
To illustrate Nvidia's latest Grace Blackwell and their GB200 systems, those have an Arm-based CPU tightly
integrated in a chiplet package to their Blackwell GPU accelerator, and CUDA, which is their programming
interface that runs on the Arm CPU, and used to control the algorithm running in the GPU.
Now, one thing that is very interesting is that because these AI models are evolving so much more quickly
than the hardware, the latest large language models from ChatGPT or any of the other AI companies, andthe chips that are running them, were developed long before the software was invented. In order to be able
to accelerate these latest models, it is going to be a couple of years before we start getting the acceleratorsthat can run these latest language models.
Generally speaking, the CPUs are much more flexible in terms of running software. And so, there is always
a changing boundary between how much of the algorithm is run on the CPU and on the GPU. Basically, themore AI there is in the world and the more rapidly it keeps changing, then that creates a greater and greater
opportunity for the CPU. Obviously, we are the provider of many of those CPUs, so that is good for us.
Q2:
If SBG were able to invest a lot into these accelerators, would that have any additional synergies for Arm?
Or are you going to grow very well as that trend goes anyway?
A2:(Thornton) For Arm, it may not matter who the accelerator is. But for SBG, they might like having the GPU,
the CPU, and the accelerator chip all within the house.
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