ARM vs. RISC-V: Semiconductor IP Competition

The ongoing competition between the major semiconductor intellectual property (IP) firm ARM and the open-source instruction set architecture, RISC-V, has emerged as a prominent topic in the electronic components sector in recent years. With Taiwan Semiconductor Manufacturing Company (TSMC) investing in ARM, the stakes have been raised even higher. In this context, two critical aspects have come into focus: licensing fees and strategic adaptability.

Presently, the ARM architecture enjoys a commanding lead across numerous application domains within the semiconductor supply chain. These domains encompass smartphones, consumer electronics, the Internet of Things (IoT), automotive systems, notebooks (NB), servers, and more.

In the realm of automotive chips, ARM architecture holds an approximately 80% global market share. Prominent automotive chip manufacturers, such as NXP, Infineon, Renesas, Texas Instruments (TI), and STMicroelectronics, have remained steadfast supporters of the ARM architecture. The architecture's energy efficiency and thermal performance align well with the specific requirements of the automotive sector.

The primary revenue model employed by ARM involves upfront product licensing fees and royalties tied to production and sales volume. For semiconductor companies with substantial production volumes, this translates to higher royalty payments as sales increase. Consequently, royalties have become an inescapable fixed cost for them.

Recent developments include ARM's initial public offering (IPO) in the United States, prompting significant semiconductor industry players to invest and acquire stakes. Their goal is to secure their position in the realm of patents and prevent potential competitors from gaining a foothold, which could jeopardize their competitive advantage.

However, the escalating costs associated with royalties, directly linked to chip production and sales volume, have led the automotive chip sector to explore alternative strategies. The automotive industry is currently undergoing a transition toward increased electrification and digitalization, resulting in a yearly surge in chip demand. Using 2022 as a baseline, conventional vehicles require approximately 550 chips, while electric vehicles demand around 770 chips. As the market share of electric vehicles continues to rise, coupled with heightened automotive digitalization, the demand for chips per vehicle is anticipated to remain on an upward trajectory.

This translates into a scenario where automotive chip manufacturers will continually experience rising expenditure related to chip royalties during the ongoing transition. Consequently, industry stakeholders acknowledge that, driven by considerations similar to those of major semiconductor companies, the automotive chip sector should explore alternatives to the ARM architecture during its early adoption phase. This is intended to diversify future cost burdens, with the open-source RISC-V architecture emerging as the most favorable choice for industry participants.

Analysts contend that the successful infiltration of RISC-V across various application domains represents a significant initial milestone. RISC-V, due to its shared characteristics with ARM, particularly its reduced instruction set, has garnered considerable attention. Additionally, RISC-V does not entail royalty fees, rendering it an enticing option. In recent years, prominent entities from various sectors have joined the RISC-V ecosystem. These entities, with significant influence in diverse application domains, have the capacity to mobilize software and platform partners, thereby rapidly augmenting the impact of RISC-V.

Furthermore, RISC-V offers enhanced design flexibility. While ARM provides a comprehensive blueprint, including pre-prepared components, RISC-V furnishes only the blueprint, allowing companies to procure their components. This heightened flexibility empowers companies to differentiate their products more effectively, rendering it more suitable for the industry's future evolution.

In recent times, numerous semiconductor companies have proactively positioned themselves for RISC-V adoption. For instance, in August, companies such as Qualcomm, Bosch, Infineon, NXP, and Nordic jointly invested in the establishment of a RISC-V joint venture in Germany, with a primary focus on the automotive sector. Corporations like Renesas and STMicroelectronics have also introduced products based on the RISC-V architecture. Moreover, while major players in the information and communications technology (ICT) sector continue to endorse ARM, they simultaneously engage with the RISC-V community, recognizing the growing convergence between ICT and automotive electronics.

In a recent filing related to its IPO in the United States, ARM disclosed that industry leaders, including AMD, Apple, Intel, NVIDIA, Samsung Electronics, Google, Cadence, Synopsys, TSMC, and MediaTek, have expressed interest in investment opportunities within ARM.