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Arm considering price increase up to 300% and making its own chips

tonyget

Well-known member
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SAN FRANCISCO, Jan 13 (Reuters) - Arm Holdings a technology supplier to chip firms, is developing a long-term strategy to hike prices by as much as 300% and has discussed designing its own chips in a move to compete with its biggest customers.

For decades, the British firm kept a low profile while operating at the heart of billions of dollars of chip sales per year. It licenses the intellectual property that Apple (AAPL.O) and others use to design their chips, charging a small royalty for each chip produced with Arm technology.

Despite its key role in the rise of smartphones and energy-efficient data center chips, Arm has remained small compared with its customers, with $3.23 billion in revenue for fiscal-year 2024. In its most recent fiscal year, Apple's revenue from hardware products, which are all powered by Arm-based chips, was more than 90 times larger.

But Masayoshi Son, CEO of SoftBank Group (9984.T) which owns 90% of Arm, and Arm CEO Rene Haas, are determined to change that, according to plans revealed in a trial last month in which Arm aimed unsuccessfully to secure higher royalty rates from Qualcomm. The details of Arm's ambitions, which were described in court testimony and documents that remain under seal, have not been previously reported.

Arm and Qualcomm declined to comment.

Known in its early stages as the "Picasso" project, Arm's plans, which date back to at least 2019, aim for a roughly $1 billion increase in annual smartphone revenue over about 10 years, according to sealed executive testimony.

Arm planned to achieve this partly by increasing the per-chip royalty rates that customers pay for ready-made parts of chip designs that used its latest computing architecture, called Armv9.

During the trial, documents were shown from August 2019 in which Arm executives discussed a 300% rate increase. In December 2019, Arm's then-CEO, Simon Segars, told Son, Arm's board chairman, that Arm had secured a deal with Qualcomm to use ready-made technology under the "Picasso" initiative.

But Qualcomm and other large customers such as Apple are sophisticated enough to design their own chips from scratch using Arm's architecture without needing Arm's higher-priced ready-made offerings, meaning they would not necessarily be subject to all of those rate increases.

“We have rough legacy agreements with Qualcomm and Fender," Haas said in a Microsoft Teams chat held the day Qualcomm bought Nuvia in 2021, shown at trial. The startup would help Qualcomm use less of Arm's ready-made technology.

"Fender" is Arm's internal code name for Apple. Apple declined to comment.

'CHILL' FOR CUSTOMERS

After SoftBank acquired Arm in 2016, the British firm's computing architecture went from powering smartphones to making big inroads in PC and data center markets.

The plans Arm executives discussed included potentially inching closer to making a complete chip design of Arm's own, according to testimony and documents at trial. Arm sells chip-design blueprints, but most of its customers still spend months completing the chip design.

"It was news to me that Arm is even thinking about (making its own chip)," said Tantra Analyst founder Prakash Sangam, who attended the trial. "It should send a chill down the spine of their customers."

At the trial, Qualcomm attorneys showed a slide from Haas' presentation to Arm's board in February 2022 when he applied to become CEO that suggested Arm change its business model. Haas said instead of selling only chip blueprints, Arm should sell chips or chiplets, a smaller building block used to make some processors made by Advanced Micro Devices.

In a conversation with another Arm executive a few months earlier, Haas expressed confidence that Arm could compete against its own customers if it put a chip into the marketplace, according to testimony and documents.

"(The) rest are hosed," Haas said in a Teams message from December 2021, shown during the trial, referring to the problems chip companies such as Qualcomm would face competing with a complete Arm chip design.

During the trial, Haas downplayed those comments, saying they reflected the long-term strategic spitballing in which many executives engage in talks with colleagues and board members.

Haas said while Arm never got into the chip-design business, he is always considering possible strategies.
"That’s all I think about, is the future," he told the eight-person jury.

The trial also included showing Arm sought to work more closely with device makers.
In October 2022, Son and Haas met with executives at Samsung. During that meeting, Son told Samsung executives that Qualcomm's license with Arm would expire in 2025.

Qualcomm Chief Executive Cristiano Amon testified that Samsung later expressed concern about Qualcomm's ability to supply Samsung with chips. Amon testified he assured Samsung that Qualcomm has an Arm license until 2033.

Samsung later reduced a three-year chip supply agreement with Qualcomm to two years because of the uncertainty created by the episode, Amon testified. Arm has objected to some aspects of Amon's testimony.

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Reporting by Stephen Nellis and Max A. Cherney in San Francisco and Tom Wils in Wilmington, Delaware; editing by Kenneth Li, Rod Nickel and Matthew Lewis

 
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Why not!!!

Do what the market will bear no?

Price of goods not coming down anytime soon.

The Corporate Gravy Train , no signs of stopping.
 
The sheer delusion of ARM is simply asdonding. One would hope getting slapped down on all counts by Qualcomm in court will change their behaviors, but it probably won't. "Hey let's shake down our customers, sue them to force them to destroy their work, alter our existing decades long deal with them, and also shove our own fully complete systems down their and their customer's throats.". Even if they had the chip design prowes of Nvidia the guts to do that are insane. Having these """"premium"""" offerings you are trying to pedal be worse than what your customers have already developed is worthy of being thrown in the loonny house. But who knows maybe Haas is just trying to correct ARM's stock price to an actually reasonable valuation for an IP licencing house with a moderate revenue base.
;)
 
maybe Haas is just trying to correct ARM's stock price to an actually reasonable valuation for an IP licencing house with a moderate revenue base

Likely so. It may even work short term!
But what do you guys think about potential alternative architectures? Wouldn´t such a move only force customers in a different direction long-term?
Similar movement seems to be happening with Broadcom/VMWare, whose pricing policy seems to be harming its existing business.
 
Likely so. It may even work short term!
But what do you guys think about potential alternative architectures? Wouldn´t such a move only force customers in a different direction long-term?
Similar movement seems to be happening with Broadcom/VMWare, whose pricing policy seems to be harming its existing business.

Git while the gitting is good!!!

😁😁😁😁

Is it they have seen NVIDIA filling their boots so want a piece of that action?
 
Talking about actually competing with their customers.

Rarely does this work out in the semiconductor industry but we shall see. Arm is a monopoly of sorts, hopefully the RISC-V alternative arrives in time. I am seeing signs of many RISC-V design starts at even the biggest companies, QCOM included.
 
Arm's adversarial relationships with its customers has always mystified me, but now I think they've goose-stepped into crazy town.

I have often wondered what Apple's Arm Architecture license looks like, since Apple was a co-founder. I wonder if it's perpetual?
 
The sheer delusion of ARM is simply asdonding. One would hope getting slapped down on all counts by Qualcomm in court will change their behaviors, but it probably won't. "Hey let's shake down our customers, sue them to force them to destroy their work, alter our existing decades long deal with them, and also shove our own fully complete systems down their and their customer's throats.". Even if they had the chip design prowes of Nvidia the guts to do that are insane. Having these """"premium"""" offerings you are trying to pedal be worse than what your customers have already developed is worthy of being thrown in the loonny house. But who knows maybe Haas is just trying to correct ARM's stock price to an actually reasonable valuation for an IP licencing house with a moderate revenue base.
;)

It is all has to do with Mr. Son, who, in Japan, has a repution borderlining with a Jeffrey Skilling. He is like a Japanese version of Elon Musk.
 
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