Arm Holdings (ARM), the UK-based firm responsible for semiconductor chip designs utilized in over 95% of all smartphones worldwide, including Samsung's, is looking to change how it charges brands for its chip designs. This change in business strategy comes ahead of the company's preparation for the IPO (Initial Public Offering) in New York this year, Financial Times reported Thursday. The SoftBank-owned company has already alerted numerous major customers of the pending shift to its preceding business structure, as evidenced by industry sources and ex-staff members.
Apparently, ARM is looking to modify its royalty system, discontinuing the practice of charging chipmakers based on the value of the chips and instead shifting to a device-value-based model. This policy shift is anticipated to significantly increase the amount of revenue generated for every design sold, as the monetary worth of the average smartphone is substantially higher than a single chip. Arm is going to customers and saying, “We would like to get paid more money for broadly the same thing,” a former senior employee told Financial Times.
Major firms such as MediaTek, Unisoc, Qualcomm, Xiaomi, and OPPO have been apprised of the impending price alterations. Also, it is thought that the company is looking to procure a minimum of $8 billion through a remarkably successful US Stock Market launch anticipated to take place in the current year.
How would the price change affect Samsung… And you of course
Samsung's System LSI division has developed the Exynos series of ARM-based system-on-chips, which are manufactured by Samsung Foundry. Exynos and Snapdragon are two chips typically incorporated into Galaxy phones, both based on ARM chip designs. An increase in the cost of ARM chip designs would mean that Samsung would have to pay extra, and likely, this cost may then be passed on to the consumer. However, it remains to be seen whether Samsung will take this route or find another way to cover the additional expense.
Furthermore, Samsung is reportedly aiming to challenge Apple's proprietary silicon technology by creating its own advanced processors for use in smartphones and personal computers. With this move, the South Korean tech company will gain control over the entire design and optimization process, akin to Apple's departure from Intel. This effort is being spearheaded by an internal team and headed up by Rahul Tuli, a former AMD developer. Therefore, instead of continuing to utilize Arm for its Exynos processors, the shift towards in-house design should allow Samsung to construct higher-spec chips.
