The Japanese company SoftBank (TSE:9984) has acquired the British ARM Holdings (NASDAQ:ARMH), sending their Tokyo-listed shares plummeting by 11%. Although most consumers have not heard of ARM, they most certainly use devices that utilize the ARM design, such as the iPhone.

With a whopping $32 billion acquisition, SoftBank founder and CEO Masayoshi Son is to take the primarily telecom based company into the semiconductor industry. At first glance, $32 billion is a staggering amount to pay for a company that earned $1.2 billion in the last year. However, the big bet is on the rapid explosion of chips that are shipped with ARM processors, primarily in the Internet Of Things (IoT) and artificial intelligence (AI) applications. Skepticism still remained among the markets as SoftBank’s stock price fell due to the high premium associated with this purchase.

ARM does not actually manufacture any chips themselves. Rather, they license the design protocol for the RISC chips to be used by companies such as NVidia Corporation (NASDAQ:NVDA)and Apple (NASDAQ:AAPL).

RISC stands for “Reduced Instruction Set Computing”, which provides operating system level kernel code a streamlined set of mnemonics into which to compile the source code. This is in contrast to CISC architectures, like those commonly associated with Intel’s (NASDAQ:INTC) x86 line of processors.

The IoT revolution may yield immense success for SoftBank, as every item such as refrigerators, thermostats, smartphones, microwaves, and even toilets, are increasingly given RISC brains.

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