Report: Arm Holdings Plans Sweeping Price Hikes

In the wake of its failed legal battle against Qualcomm, Arm Holdings has a new plan to grow revenues, and it’s as old as time itself. It will simply raise prices, and dramatically. That’s according to a new report in Reuters, which says that price increases on its chip design licenses could grow as much as 300 percent in the coming decade.

As you know, Arm Holdings provides the basic blueprints for the Arm-based processors that licensees like Apple, Qualcomm, Samsung, and many others use as the basis of their own chip designs. But Arm makes far less in revenues than many of its customers, and by a wide margin. For example, Qualcomm makes roughly ten times the revenues of Arm each quarter, while Apple is nearly 90 times as big by revenues.

Given this, it’s perhaps not surprising that Arm’s parent company, Softbank, has directed the firm to increase revenues. Its first step was to raise the licensing costs of its latest generation chip designs, called Arm v9. And when Qualcomm acquired Nuvia to create Arm chips for PCs, Arm essentially tried to double-bill the firm, arguing that it was required by pay Nuvia’s licensing fees in addition to its own. Qualcomm rejected that claim, so Arm took the fight all the way to federal court. But a jury determined that Qualcomm’s existing license with Arm covered the chips it created using Nuvia technologies too.

It’s likely that Arm would have continued raising licensing costs over time regardless of the outcome of Arm v. Qualcomm. And we learned from the court case that Arm at one point considered manufacturing its designs, putting it in direct competition with its licensees.

The goal is to raise annual revenues by $1 billion in 10 years. (The firm earned less than $4 billion in revenues in the previous year.) Some of this will come from higher licensing fees, but because its bigger customers–Apple, Qualcomm, and a few others–won’t ever license the new designs, Arm launched the “Picasso” project to design more complete chips and manufacture and sell them directly. As an interim step, it could also design and sell chiplets, smaller sub-chip components that others might combine into or use in more complete products.

Internal communications revealed in the trial, but not made public before the Reuters report, show that CEO Rene Haas was obsessed about these plans and wanted to put the hurt on Qualcomm, in particular. “[They] are hosed,” he wrote in a 2021 Microsoft Teams chat with another Arm executive. Haas tried to downplay the damaging comments, testifying to the jury that, “All I think about, is the future.”

But Arm was also caught lying to other licensees to harm Qualcomm during the trial. Haas told Samsung in 2022 that Qualcomm’s license agreement was set to expire in three years, causing Samsung to reduce a chip supply agreement with Qualcomm from three years to two. But Qualcomm CEO Cristiano Amon testified that Qualcomm’s license is good through 2033.

Arm didn’t comment on the Reuters report. But Arm chief commercial officer Will Abbey told a different publication that the firm has plans to expand into AI chip designs to “bring AI to the masses,” another key growth driver for the future. But Abbey declined to comment on reports that Arm’s first AI chips could be ready this year. And he was mum on whether Arm still planned to sell its own chips to customers directly, bypassing licensees.

Abbey did comment on Intel’s dramatic decline last year, noting that Intel’s partnership with AMD and others on an x86 Ecosystem Advisory Group, unthinkable when Intel was healthy, was essentially an “endorsement” of Arm’s business model. “We’re a big believer in standards,” he said. “We’re a big believer in choice … Competition is healthy for the whole of the ecosystem.”