“Arm Seeks to Raise Prices ahead of Hotly Anticipated IPO: SoftBank-Owned Group Aims to Charge More for Each Chip Design in Radical Shake-Up of Business Model”, 2023-03-23 (; backlinks):
Arm is seeking to raise prices for its chip designs as the SoftBank-owned group aims to boost revenues ahead of a hotly anticipated initial public offering in New York this year. The UK-based group, which designs blueprints for semiconductors found in >95% of all smartphones, has recently informed several of its biggest customers of a radical shift to its business model, according to several industry executives and former employees.
These people said Arm planned to stop charging chipmakers royalties for using its designs based on a chip’s value and instead charge device makers based on the value of the device. This should mean the company earns several times more for each design it sells, as the average smartphone is vastly more expensive than a chip.
…“Arm is going to customers and saying ‘We would like to get paid more money for broadly the same thing’”, said one former senior employee who left the company last year. “What SoftBank is doing at the moment is testing the market value of the monopoly that Arm has.”…Arm has also become more aggressive in pushing price increases within its existing sales model for royalties and licences over the past year, particularly for customers making chips for smartphones, where it has a dominant market position, according to people with knowledge of the recent moves.
…The average price for a smartphone computing chip is about $40 for Qualcomm, $17 for MediaTek and $6 for Unisoc. Arm charges royalties of about 1–2% of the value of each chip sold based on its designs, according to Sravan Kundojjala, an analyst at TechInsights. By contrast, the average smartphone sold for $335 in 2022. While it is unlikely Arm would seek as much as 1–2% of the value of each device, those familiar with the matter said the company would set its new pricing in a way that substantially increases overall earnings.
“The [royalty] amount will be at least several times higher than what Arm gets now”, said an executive from a leading Chinese smartphone maker which has so far refused to back the proposed plan. “We are told that they hope such changes could start from 2024.” Some of Arm’s customers, including Apple, are both chipmakers and device makers, and have special licensing and royalty agreements with Arm. The iPhone maker is not involved in discussions about the change to Arm’s business model, said executives with knowledge of the company’s recent discussions.
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