 "Arm’s new strategy faces several challenges. While the company hopes to profit from its own chips, it risks alienating its customer base, which could start turning to alternative chip designers. Image Credit: Reuters")
Arm, the company behind much of the technology powering your smartphone, could be set to shake up the chip industry. Known for helping companies design processors for mobile devices, Arm is considering a major shift: moving into manufacturing its own chips. This plan, dubbed “Picasso,” is a bid to increase revenue by selling its own chips, which would put it in direct competition with some of its biggest customers, like Qualcomm and Apple. These companies currently buy Arm’s intellectual property to help design their own chips, but Arm’s new strategy could change the game.
The company is also reportedly looking at raising the royalty fees it charges its customers. This would mean higher costs for companies that rely on Arm’s designs, adding another layer of competition in an already crowded market.
A legal tussle with Qualcomm
Arm’s new direction comes on the back of a legal dispute with Qualcomm. The two companies had a row over royalty terms, which reached a head in December 2024. The issue stemmed from Arm’s purchase of Nuvia, a start-up with technology Arm wanted to use to make its own chips.
This led to a lawsuit over licensing breaches, with Arm challenging Qualcomm’s use of Nuvia’s technology. However, a US jury sided with Qualcomm, ruling that its Nuvia-powered chips were properly licensed, allowing the company to continue its push into personal computing and AI.
Arm’s bold plans
Documents from the case, which are still sealed, suggest that Arm’s move to sell its own chips was driven by CEO Rene Haas. Before taking on his role, Haas had allegedly described Arm’s biggest customers as “hosed” in a company message.
This frustration seems to reflect his broader vision of shaking up the current model and taking a larger piece of the market. Internal discussions even hint at a 300% increase in royalty rates for customers using Arm’s latest architecture, Armv9, in an effort to generate an extra $1 billion in smartphone revenue over the next decade.
However, it’s unclear whether these higher royalty rates will ever come to pass. While Arm’s architecture is widely used, companies don’t necessarily need to buy Arm’s pre-made designs. Many of its biggest clients, now also its competitors, have the ability to design their own chips without relying on Arm’s blueprints.
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More ShortsA complex future
Arm’s new strategy faces several challenges. While the company hopes to profit from its own chips, it risks alienating its customer base, which could start turning to alternative chip designers.
The plan to hike royalty rates adds another layer of uncertainty, as many of Arm’s top clients are well-equipped to move away from Arm’s designs altogether. The future of “Picasso” and whether it will reshape the chip market remains uncertain, but Arm’s push for greater control over its own products is sure to ruffle some feathers.