Despite Apple’s reliance on Arm as the instruction set for iPhone chips, Arm earns less than 5% of its annual revenue from Apple. A new report details how this has been a heated point for Arm, especially now that the company is publicly traded and looking for growth. However, Softbank CEO Masayoshi Son has proved unsuccessful at forcing Apple to pay more in licensing fees.
Specifically, Apple pays Arm “less than 30 cents per device for the right to use Arm-based chips in the hundreds of millions of iPhones, iPads, Macs and Apple Watches it sells each year,” The Information reveals.
That’s the lowest royalty rate among Arm’s smartphone chip customers, traditionally its biggest group of customers by revenue, the people said. As a result, Apple accounts for less than 5% of Arm’s sales, around half the figure for each of the chip company’s top two customers, Qualcomm and Mediatek, they said.
And while Apple and Arm have a multi-decade long licensing agreement, The Information does mention that Apple has at least considered life after Arm:
In the meantime, Apple has explored the long-term possibility of using a competing technology in the chips for its devices, according to one former Apple employee. The loss of Apple would be a major blow to Arm.
That’s likely a reference to the license-free RISC-V technology, which would require a decade or so of work for Apple before being a viable alternative.
What’s also apparent in the report is that SoftBank CEO Masayoshi Son really wants Apple to pay Arm more, but Arm really doesn’t have any leverage.
At one point, Son called Apple CEO Tim Cook to tell him Arm would be raising prices for all its major smartphone and chip customers. Cook’s team reassured him that Arm couldn’t raise fees, because the companies’ contract at the time lasted through 2028. Son backed off. Since then, Apple and Arm have been through several rounds of negotiations that have kept the financial terms of Apple’s deal largely in place, people familiar with the matter said.
Check out the full report at The Information.
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