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Smartphone brands could get their Arm twisted: Pricier phones coming?

Arm's apparent change to its licensing model could net it more cash, but will this result in higher device prices?

Published onMarch 28, 2023

ARM logo
Kris Carlon / Android Authority
  • Chip designer Arm will reportedly change its licensing model.
  • It’s believed the company plans to charge device makers based on a device’s value.
  • This could lead to much higher earnings for the firm.

Arm is a cornerstone of the tech industry, as its computing technology is used in virtually every smartphone and in a variety of other consumer product categories. Now, it sounds like the chip designer could be rethinking its licensing model.

The Financial Times has reported that Arm wants to raise the price of its chip designs by switching to a new licensing model as soon as next year, citing several industry executives and former employees.

According to the news outlet, Arm intends to stop charging chipmakers royalties for Arm chip designs based on a chip’s value. Instead, it’s claimed that Arm now intends to charge device makers for royalties based on the device value.

“Arm is going to customers and saying ‘We would like to get paid more money for broadly the same thing’,” a former senior Arm employee told the Financial Times.

Charging device makers an Arm and a leg?

This proposed change will purportedly result in the company earning much more for each silicon design compared to the current strategy. After all, smartphones can vary wildly in price, topping out at under $2,000 for foldable phones, so even charging a much smaller percentage could still yield more cash. This could potentially translate into higher device costs and therefore higher pricing for consumers.

“The (royalty) amount will be at least several times higher than what Arm gets now,” an executive at a major Chinese smartphone maker told the outlet. This company has reportedly refused to back the change, but it might not be the only company pushing back. The Financial Times reported that Arm has been “frustrated by customers’ reluctance to accept the new arrangement.”

Arm's reported change to its licensing model could potentially result in higher prices for smartphones.

The current approach sees Arm selling CPU designs, GPU designs, architecture licenses, and more to chipmakers such as Qualcomm, MediaTek, and others. Arm then charges a royalty fee to these chipmakers for each processor they ship. From here, these chipmakers would sell their processors to device makers such as Samsung, Xiaomi, OPPO, and others.

The outlet also asserted that chipmakers MediaTek, Unisoc, and Qualcomm were made aware of the proposed changes. It’s believed that several Chinese smartphone makers including OPPO and Xiaomi were made aware of the plan too.

Is there fire to this smoke?

This isn’t the first time we’ve heard about apparent changes to Arm’s licensing model. Qualcomm previously asserted in court documents back in late 2022 that Arm would license technology to device makers instead.

Nevertheless, Arm rubbished these claims at the time, saying Qualcomm’s claims were “misinformed” and “misleading.” Arm added that it would continue to provide tech to semiconductor companies and device OEMs alike.

We asked Arm about this latest report but the company told us that it doesn’t comment on “rumor and speculation.”

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