Arm Plans 300% Price Hike, Considers Own Chip Designs

Arm is reportedly developing a long-term strategy aimed at increasing prices by up to 300%. The company is also exploring the possibility of designing its own chips to compete with its largest clients.

For decades, Arm has operated with a low-profile approach, generating billions of dollars in chip revenue annually. It licenses its intellectual property to companies such as Apple, Qualcomm, and Microsoft, collecting modest patent fees on each chip manufactured using its technology.

Despite its critical role in the rise of smartphones and energy-efficient data center chips, Arm remains much smaller than its clients, with 2024 fiscal year revenues of $3.23 billion. In comparison, Apple's hardware products— all using Arm chips— generated revenue over 90 times higher in the same period.

However, a recently revealed court filing sheds light on Arm's future ambitions, as CEO Rene Haas and SoftBank's Masayoshi Son, who holds 90% of Arm's shares, are determined to change the company's financial position. The filing, from a recent trial, detailed Arm's attempt to raise patent licensing fees with Qualcomm, though the effort was unsuccessful.

The court documents revealed plans dating back to 2019, initially referred to as the “Picasso” plan, aimed at increasing annual revenues from smartphone licensing by approximately $1 billion over a decade. To achieve this, Arm intends to raise the patent fees on chips using its latest Armv9 architecture.

During the trial, it was disclosed that Arm executives discussed a potential 300% price increase in August 2019. By December 2019, then-CEO Simon Segars informed SoftBank’s board chairman that Arm had reached an agreement with Qualcomm under the Picasso plan to utilize existing technology. However, clients like Qualcomm and Apple, which are large enough to design their own chips using Arm's architecture, may not be affected by the price increase, as they could opt for customized chips instead of higher-cost off-the-shelf solutions.

Rene Haas commented during a 2021 Microsoft Teams chat on the day Qualcomm acquired Nuvia, indicating that Arm had entered into broad traditional agreements with major clients like Qualcomm and Apple. Nuvia helps Qualcomm reduce its reliance on Arm’s off-the-shelf technology.

Furthermore, court testimony and documents suggest that Arm is considering expanding its strategy to include complete chip designs. While Arm primarily sells chip design blueprints, many of its clients still need months to complete chip development. Haas emphasized that Arm should not just sell chip designs but could also offer chips or "chiplets"— smaller components used in processors made by companies like AMD.

Documents also reveal that Haas has considered the possibility of Arm entering the chip market and competing with its own clients. Though Arm has traditionally refrained from chip manufacturing, Haas has indicated that this strategy remains a consideration.