By hmimcu 
According to foreign media reports, British chip designer Arm Ltd. plans to significantly increase chip design royalty fees, hoping to boost revenue before the New York IPO in 2023.
According to people familiar with the matter, ARM, a British chip design giant under Softbank Group, is seeking to increase the price of its chip designs and hopes to increase revenue before the highly anticipated New York IPO this year.
Several industry executives and former employees have stated that Arm has recently notified several major clients that the company will completely transform its business model. The basis for ARM to collect design royalties in the future will be changed from average chip price to average device price, mainly affected by ARM’s most famous “Cortex-A” design, which is the foundation of smartphone processor development. This means that the royalty earned by Arm for each design sold will increase several times, as the average price of smartphones is much higher than that of chips.
It is rumored that MediaTek, Unisoc, Qualcomm, as well as several Chinese smartphone manufacturers including Xiaomi and Oppo, have all been informed of ARM’s price increase plan. It is worth noting that Apple, which has signed a special authorization and royalty agreement with Arm, seems to have not yet been involved in the discussion of Arm’s business model change.
It is reported that ARM’s authorization methods are divided into two categories: TLA (Technology License Agreement) and ALA (Architecture License Agreement): TLA refers to customers directly purchasing ARM’s IP for use, which can be partially modified, such as Qualcomm’s Snapdragon series chips; ALA allows customers to design their own IP and develop custom processor cores based on the instruction set under the Arm architecture, with Apple chips being a typical representative.
However, the difference between TLA and ALA licensing is that TLA royalties include Arm’s work in developing complete CPUs, resulting in higher licensing fees; The licensees under ALA invest heavily in developing their own CPUs, resulting in lower licensing fees.
Currently, over 95% of smartphones use ARM’s chip architecture, while Qualcomm, MediaTek, and Spreadtrum currently have average smartphone chip prices of $40, $17, and $6, respectively. Currently, ARM charges royalties equivalent to 1-2% of the price of a single chip. By comparison, the average selling price of smartphones in 2022 was $335 per unit. Sources pointed out that although ARM is unlikely to require a royalty of 1-2% of the selling price for each phone, the new pricing strategy is bound to significantly increase the overall surplus.
In response, a voice pointed out: “If the news is true, the RISC-V architecture may soon usher in spring, when all chip manufacturers capable of self-developed will embrace RISC-V; even if the news is false, it will remind other manufacturers to start investing in the RISC-V environmenthttps://www.stoneitech.com/