What’s next for ARM? The company’s owner, Softbank, has been in financial trouble lately, and this is causing Arma to jump from one dramatic opportunity to another. Arm was originally up for sale and Nvidia was the frontrunner to buy the company. That plan was shut down by the regulators, and “Plan B”is now an IPO due on the NYSE sometime this year. If you want to be successful in the stock market, you have to show income, and while Arm allows you to sell billions of dollars worth of devices worldwide, the company’s chip licensing scheme brings in a relatively small amount of money – about $500 million per quarter.
The Financial Times published a report on a “radical overhaul”of Arm’s business model. The new plan is to raise prices across the board and charge “several times more”than they currently do for chip licenses. According to the report, Arm wants to stop charging chip suppliers to produce Arm chips and instead wants to charge device manufacturers, especially smartphone makers, a fee based on the overall price of the final product.
Let’s say Motorola makes a phone with a Qualcomm Snapdragon Arm chip. Previously, Qualcomm would have signed an Arm license agreement with Arm, and that license would have extended to anyone who buys a Qualcomm Arm chip, such as Motorola. Qualcomm contributes a lot to developing its own chips, but when it comes to the Arm license, it is basically an Arm reseller. Arm will now demand a license fee from Motorola (and not Qualcomm?) and ask Qualcomm not to sell the chips to anyone who doesn’t have a licensing agreement with Arm.
Our example doesn’t include companies as obvious as Apple or Samsung because they have much more complex deals with Arm. The two are chip vendors and device builders, and Apple doesn’t even use Arm design, it only uses the architecture license. Apple and Samsung will have their own licensing deals, but it’s hard to imagine that Arm’s new “Got to impress Wall Street”strategy won’t eventually affect them in some way.
Right now, Arm is discussing this with partners, and it is planned to introduce pricing changes in 2024, but we assume that the current contracts will force some companies to use the old model for a few more years. The report states that “MediaTek, Unisoc and Qualcomm, as well as several Chinese smartphone makers including Xiaomi and Oppo, are among the companies that have been informed of the proposed pricing change.”accept the new order.
Dream Scenario for RISC-V
The report quoted a former senior employee as saying, “Arm goes to clients and says, ‘We’d like to get more money for the same thing overall.’ SoftBank is currently reviewing the market value of the monopoly owned by Arm.”
If customers decide they don’t like Arm’s new pricing structure, competition is fiercer than ever before. While Arm is basically a mobile monopoly on anything smaller than a laptop, RISC-V is a new project that promises energy efficient chips under a free and open source license. While Arm currently has an incredible supporting ecosystem with device designs, a large user base, and a million developer tools, Arm’s ongoing drama makes the transition to RISC-V more rewarding every day.
As Arm first went up for sale and now rethinks its business model, the company has become an unstable partner for other businesses trying to plan their product lines years in advance. The influence of the US government on the Arm is also of concern to China, as is the potential use of the Arm as a weapon in the US-China trade war, prompting Chinese companies to rally behind RISC- V as an alternative. Arm also recently decided to sue one of its largest partners over a licensing dispute, indicating that Arm is becoming increasingly difficult to work with. The company has also failed to create chip designs on the same level as Apple, so any Android makers that buy an Arm chip immediately relegate themselves to second place.
There really isn’t much reason to stay with Arm other than all the (significant) strengthening factors. If Arm didn’t have all this drama, RISC-V’s need for ecosystem investment would likely alienate partners, but Arm’s constant bad news could push companies to switch. Google has heard calls for RISC-V support and recently announced plans to raise the upstart architecture to a level 1 platform in the Android codebase. the last few years of drama Arm.