How Arm aims to squeeze device makers for cash rather than pocket pennies for cores
- Reference: 1679734453
- News link: https://www.theregister.co.uk/2023/03/25/arm_ipo_license/
- Source link:
The Softbank-owned British processor designer has reportedly approached several of its largest customers about increasing fees for its blueprints, and charging device makers directly rather than licensing designs to chipmakers.
Citing multiple industry executives and former employees, the Financial Times [1]reports that Arm's revised license model would see the company charge based on the value of the end device — a smartphone or tablet, for example — rather than the value of the chips based on its designs.
[2]
How that would work looks something like this, we're told: Arm would still license its processor designs to chipmakers, but under so-called development licenses that require the chips to only be used by manufacturers that have device agreements with Arm. Those manufacturers later get the chips, put them in their notebooks and phones, and pay Arm a royalty based on the final price tag of that gear.
[3]
[4]
That ought to net Arm lots more cash, as a cut of sales of complete expensive devices should work out a lot more than the smaller royalties Arm collects per chip. Arm was already under pressure from Softbank to raise more revenue, and with an IPO coming, it appears the Cortex CPU biz need to demonstrate it has healthy sales lined up.
Traditionally, Arm has licensed its architecture and core designs to chipmakers directly, which have then sold their processors and system-on-chips to device manufacturers to integrate in their products. Arm only pockets a slice of the silicon chip sales, not of the final whole machines.
Pulled into Arm's way
If these rumors are true, the change would be in step with a strategy [5]laid out by Arm publicly last year. Last July, the company said it planned to "increase royalty revenue per chip by increasing value where it can provide more technology."
At the same time, The Register notes, the biz said it would "introduce new business models to change the competitive landscape, for example, by directly licensing its technology to OEMs and cloud service providers ."
[6]
That's our emphasis there.
Also last year, Qualcomm — which is embroiled in a heated court battle with Arm over the rights to use Nuvia's intellectual property — warned in a legal filing that Arm [7]had gone all in on its plan to charge device makers royalties, and was moving away from licensing designs to chipmakers all together.
"Arm has explained to the OEMs that a direct OEM license will be the only way for device-makers to get access to Arm-compliant chips," the filing read.
[8]
At the time, Arm's top spokesman dismissed the claims, and said the Qualcomm filing was "riddled with inaccuracies."
The Register reached out to Arm again about the alleged changes, and the outfit declined to comment stating that it doesn't comment on rumors or speculation.
[9]Financial red tape blamed for London losing Arm IPO
[10]Qualcomm: Arm lawsuit motivated by greed, 'payback' for opposing Nvidia takeover
[11]Arm still strong despite SoftBank loss as shipments pass a quarter of a trillion
[12]Qualcomm: Arm threatens to end CPU licensing, charge device makers instead
As you might expect, pushing higher license fees onto device manufacturers isn't going over well with everyone involved, with one Chinese smartphone maker grumbling that the royalties would be several-times higher than what Arm gets now. We believe a good part of the momentum behind [13]RISC-V is from Arm licensees weighing up whether it's more cost effective to create or source alternative RISC-V CPU cores than play Arm's new payment game, or at least use the nascent architecture as a bargaining tool against Arm.
Imagination Technologies – which designs and licenses families of GPUs that rival Arm's graphics cores, and has [14]embraced RISC-V – is among those who have noticed unrest in the semiconductor world over Arm's whispered intentions.
Arm’s behavior is unsettling their existing customer base with their customers complaining to us around their aggressive pricing
"Arm’s behavior is unsettling their existing customer base with their customers complaining to us around their aggressive pricing," a spokesperson for Imagination told us. "We have no plans to change our business model as it’s important that chipmakers and device makers continue to have the freedom to choose their IP provider as this is key to driving innovation and technological advancement."
For the moment, the changes to Arm's licensing model appear to be focused on the use of its CPU core designs, which includes its popular Cortex lineup found in many smartphones. Reports suggest MediaTek, Unisoc, and Qualcomm have been approached by Arm on the topic. Apple, which holds an architectural license and designs its own cores, apparently isn't involved in the negotiations.
That's not to say Arm won't bring similar changes to architectural license holders. The rules governing these licenses, which are used to develop custom chips compatible with the Arm instruction set, are at the heart of Qualcomm's [15]legal battle with Arm over the acquisition of chip startup Nuvia in 2021. Qualcomm paid $1.4 billion for that startup with a plan to develop its core tech into high-end CPUs for datacenter, phones, and other applications.
However, Arm argued that the US chip titan broke the terms of its licenses from Arm, and demanded the destruction of Nuvia's CPU designs.
The alleged changes to Arm's licensing come as the company prepares an initial public offering in New York. Many had hoped for a dual-listing on the London Stock Exchange, but Arm-owner SoftBank ultimately abandoned those plans [16]citing unfavorable financial rules and a lack of flexibility on the part of the UK's Financial Conduct Authority. ®
Get our [17]Tech Resources
[1] https://www.ft.com/content/25ea2570-264d-472d-8ef8-3a02003e87ab
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZB7UVHQhz3fSvJ1JkTFJ-wAAAI4&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZB7UVHQhz3fSvJ1JkTFJ-wAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZB7UVHQhz3fSvJ1JkTFJ-wAAAI4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://group.softbank/en/ir/financials/annual_reports/2022/message/arm
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZB7UVHQhz3fSvJ1JkTFJ-wAAAI4&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2022/11/01/qualcomm_arm_cpu
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZB7UVHQhz3fSvJ1JkTFJ-wAAAI4&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[9] https://www.theregister.com/2023/03/06/fca_rules_arm_listing/
[10] https://www.theregister.com/2022/10/14/qualcomm_arm_lawsuit_nuvia/
[11] https://www.theregister.com/2023/02/07/arm_revenue_up_28_percent/
[12] https://www.theregister.com/2022/11/01/qualcomm_arm_cpu/
[13] https://www.theregister.com/2022/05/16/riscv_world_domination/
[14] https://www.theregister.com/2022/01/27/gpu_riscv_imagination/
[15] https://www.theregister.com/2022/10/14/qualcomm_arm_lawsuit_nuvia/
[16] https://www.theregister.com/2023/03/06/fca_rules_arm_listing/
[17] https://whitepapers.theregister.com/
Re: I can see how this will work out...
I guess it also means that Gordon Ramsey would pay a lot more for potatoes than I do.
Let's see how strong Arm's ARM is... Will they have much power to strong arm?
"Arm intends to alter its royalty program, ceasing to charge chipmakers royalties for using its designs based on a chip's value, and instead charge device makers based on the value of the device, the report said.
"Arm is going to customers and saying 'We would like to get paid more money for broadly the same thing', a former senior employee who left the company last year told FT."
Two quotes from the article in the Financial Times that broke the story.
So it seems that Qualcomm were right about what Arm are intending to do.
Well... as the ArsTechnica article suggests, this is RISC-V's moment!
If it's Arm's intention to squeeze design companies [out of business?], as the first quote suggests, then surely those companies are going to look to alternative ISAs... So will they start designing RISC-V chips in stead?
And will OEMs, in the face of an 'ARM Tax', start using SoC like the TH1520 - which, as we know, can provide more than sufficient processing power for a phone or a netbook - in their kit in stead of ARM? ( It's not as if Arm's own designs are as good as the design company's alternatives, is it!?) The alternative is to pass on the tax to the consumer, and perhaps lose market share to cheaper RISC-V-based kit as a consequence.
Maybe we're going to see RISC-V SoCs widely used sooner than anyone thought. And what happens come 2025, when the more powerful RISC-V chips with the Vector extension come out?
Options for Much Silliness
This could get fun. The device manufacturer could bill Arm monthly for the energy its chip uses and charge them by the byte for reads and writes (writes will be more expensive, obvs). The bus would become a toll-bus. Welcome to the age of the Engineer-Accountant.
face(arm) palm
So, the Cortex series they want a piece of the device revenue where they are used. The Cortex M series is used 10..100 times more often. Many embedded applications use the M series. Do they also want a device tax with these chips that I can buy at any component pusher for whatever purpose I like?
Paying a different price for the same potato depending on what dish you make and who is making it? Sounds like an assured way to irrelevance.
I can see how this will work out...
CPU designers start to charge based on a slice of the total device value, not the CPU chip value.
4G/5G radio designers start to charge based on a slice of the total device value, not the radio chipset value.
Screen and battery designers start to charge based on a slice of the total device value, not the screen or battery value.
Soon there isn't going to be any value left in the phone at all.