In the world of semiconductor licensing, Apple stands out by paying less than 30 cents per chip to ARM, marking the lowest licensing fee among companies utilizing ARM-based chip designs. According to a report by The Information, this nominal fee applies to ARM-based chips used across Apple’s diverse range of devices, including smartphones, computers, tablets, and more. Notably, this amount represents the lowest licensing fee among companies leveraging ARM’s design, comprising merely 5% of ARM’s total sales.
The Unique Licensing Agreement
The fee paid by Apple is approximately half of what ARM’s other major clients, Qualcomm and MediaTek, contribute for a similar license. This discrepancy has reportedly raised concerns within SoftBank, ARM’s parent company, indicating discomfort with the existing arrangement. It is mentioned in the report that when SoftBank acquired ARM in 2016, there were attempts by SoftBank’s CEO, Masayoshi Son, to revise the agreement, but these efforts proved unsuccessful.
Extending the Partnership
Despite the reported dissatisfaction, the collaboration between Apple and ARM persists. In a significant move, the two companies extended their partnership agreement until 2040 in September. This extension goes beyond the typical five-year duration for such agreements. Interestingly, Apple is also exploring interests in the open-source RISC-V architecture, which does not require licensing. Consequently, industry experts suggest that this prolonged agreement provides a substantial advantage to ARM.
Implications for ARM
Collaborating with Apple remains a significant advantage for ARM and other suppliers in terms of reliability. However, Apple is known for its cost-cutting strategies, often pressuring its partners to lower prices or even incur losses. It appears that Apple’s collaboration has expanded ARM’s customer base, possibly justifying the acceptance of a lower fee.
In Summary
Apple’s unique position in paying less than 30 cents per chip to ARM showcases the intricate dynamics of licensing agreements in the semiconductor industry. While SoftBank may express discomfort with the current situation, the extended partnership until 2040 suggests a strategic advantage for ARM. As Apple continues to pursue diverse interests in chip architectures, the impact on ARM’s future remains a subject of industry speculation.
