Higher license costs: ARM wants to push through a new model
Smartphone manufacturers should in future pay license fees for the use of ARM processors if the architecture designer has his way. According to a media report, ARM no longer wants to collect license fees from chip designers such as Qualcomm or Mediatek, but from device manufacturers who use their products.
The basis for calculating the license fees should then be the device prices and no longer the prices of the mobile processors, reports the Financial Times, citing several sources from CPU designers and smartphone manufacturers, including Qualcomm, Mediatek, the comparatively small company Unisoc, Xiaomi and Oppo .
Qualcomm had already made the planned changes to ARM public as part of a legal dispute between the two companies. Other companies have so far kept a low profile.
License fees from smartphone manufacturers
Speaking to the Financial Times, TechInsights analyst Sravan Kundojjala put the average cost of a Qualcomm Snapdragon processor at $40, while Mediatek chips cost an average of $17. The processors from both manufacturers – also known as systems-on-chips (SoCs) – are found in most Android devices. ARM is currently supposed to receive one to two percent of the SoC price as a license fee for each chip. In addition, Qualcomm, Mediatek and other companies like Apple pay general license fees to be allowed to design ARM processors at all.
According to the Society for the Promotion of Consumer Electronics (GFU), Germans spent an average of 626 euros on a new smartphone in 2022; Bitkom estimated the average price at just under 550 euros. Even with a percentage reduction of less than 1 percent and using a reduced purchase price as a basis, ARM would earn significantly more. That would be a few euros per smartphone – a total of billions plus for ARM would be possible.
Around 1.2 billion smartphones were sold in 2022. A good 226 million were iPhones from Apple, which should not be affected by the adjustments due to an individual license agreement with ARM.
More profit for an IPO
Current owner Softbank plans to list ARM by the end of 2023. In recent years, ARM has already tried to increase its own profits for a good rating. In 2022, ARM is said to have pushed more aggressively for price increases within its existing license model.
The Financial Times quotes a manufacturer source as saying, “Arm goes to customers and says, ‘We’d like more money for basically the same thing.’ What Softbank is doing right now is testing the market value of the monopoly that ARM holds.”