ARM, known for its leadership in chip architecture design and licensing, could make a significant shift in its business model. According to recent reports, the company is considering raising its prices by up to 300% and exploring the production of its own chips, which could position it as a direct competitor to its current customers. This strategy, internally dubbed Project Picasso, reveals ARM’s clear intent to strengthen its market position and diversify its revenue streams.
An Ambitious Strategy: From Licensing to In-House Production
Since its inception, ARM has based its business model on licensing its chip architecture designs to third parties such as Apple, Qualcomm, and Microsoft. In exchange for royalty payments for each chip produced, these companies have utilized ARM’s innovations to develop custom processors that power mobile devices, PCs, and servers. This approach allowed ARM to remain small while its clients achieved exponential growth.
However, this dynamic no longer seems sufficient for SoftBank CEO Masayoshi Son, whose group owns 90% of ARM. Under his leadership, ARM has designed a plan to generate $1 billion in additional annual revenue in its technology division for smartphones over the next ten years. This would include a drastic increase in royalty rates for components based on its Armv9 architecture, along with venturing into direct chip production.
Own Chips? Tensions with Customers
The shift toward chip production represents a risky strategic move. According to internal documents, ARM has considered selling “finished” chips that would be integrated into system-in-package (SiP) solutions. This approach would allow its partners to focus on developing differentiating components such as CPUs or GPUs without worrying about base designs.
While this strategy could open new revenue opportunities, it would also create tensions with its existing customers, such as Qualcomm or MediaTek, who rely on ARM’s designs for their own processors. If ARM competes directly with them, relationships could deteriorate quickly.
Impact on the Tech Sector
Price Increase: A Controversial Decision
The increase in royalty prices could be a hard blow for many companies, especially those with tighter margins. However, ARM seems willing to take that risk in pursuit of greater control over its financial growth. In this context, some companies may evaluate alternatives to ARM’s architectures, such as RISC-V, which offers open designs free of royalties.
Expansion Beyond Smartphones
ARM’s plan isn’t limited to the smartphone sector. The company has already shown interest in expanding its reach into data centers and PCs, where the demand for high-performance chips continues to grow. This includes closer collaborations with manufacturers like Samsung, which could bolster its presence in these strategic markets.
An Uncertain Future for ARM and its Customers
While ARM’s strategy has the potential to significantly increase its revenue, it also presents serious challenges. The possibility of competing directly with its most important customers could fracture key relationships, while a drastic price increase could push some partners toward alternatives like RISC-V or lead them to develop their own solutions.
On the flip side, ARM’s push to enter chip production has yet to be realized. So far, the company has not begun manufacturing these products, but the mere announcement of this possibility has already generated concern among its partners.
Conclusion
ARM is at a strategic crossroads. Its decision to raise prices and explore chip production could transform its position in the global market, but it also carries significant risks. If it can execute its plan without alienating its key customers, it could emerge as an even more dominant player in the tech sector. However, any misstep in implementation could open the door for competitors like RISC-V and weaken its historical influence.
At this moment of transition, it is clear that ARM is seeking to reinvent itself and move away from its traditional licensing model, opening a new chapter in its history as a tech leader. Will this be a step toward a brighter future or an overly risky move? Only time will tell.