Welcome Here  Shenzhen Mingjiada Electronics Co., Ltd.

ARM, the British chip design giant owned by SoftBank Group, is looking to raise the price of its chip designs to increase revenue, according to sources familiar with the matter. ARM-architecture chips account for the vast majority of the smartphone market, with more than 95% of smartphones worldwide using ARM's chip architecture, according to ARM's official website. Because of their low power consumption, high performance and high level of customisation, ARM architecture chips are ideally suited to the application scenario of mobile devices. This has made ARM one of the most important chip design companies in the world.

ARM is reportedly looking to boost revenues ahead of its highly anticipated New York initial public offering (IPO) this year, which is a very common business strategy. However, ARM's exact plans and strategies are not yet known. If ARM succeeds in raising the price of its chip designs, this could have some impact on manufacturers in areas such as smartphones.

Several industry executives and former employees have said that ARM has recently informed several large customers, telling them that the company will completely shift its business model. ARM plans to stop charging chip makers royalties for the use of its designs based on the value of the chip, and instead charge chip makers based on the value of the device. This means that the company will make several times more money for each chip design it sells, as smartphones on average sell for much more than chips.

The change is one of the biggest adjustments ARM has made to its business strategy in decades. Currently, SoftBank CEO Masayoshi Son is looking to boost ARM's profits and attract investors as it approaches an IPO.

"It's the equivalent of ARM finding customers and saying to them, 'We want to get paid more for basically the same thing,'" said a former senior ARM employee who left last year: "What SoftBank is doing now is testing the market value that the ARM monopoly has."

SoftBank aims to start brokering a pricing overhaul for ARM as soon as next year, but so far the company has been frustrated by customers' reluctance to accept the new arrangement. SoftBank, which bought ARM for £24.3 billion in 2016, plans to retain a majority stake in ARM after its IPO.

MediaTek, Ziguang Zhanrui, Qualcomm and a number of Chinese smartphone makers, including Xiaomi and OPPO, were informed of the proposed changes to ARM's pricing policy, according to several people familiar with the negotiations. ARM licenses its chip designs to a number of chipmakers for use in making chips used in smartphones, computers and cars. ARM charges a licence fee for its chip designs and then charges a recurring licence fee for each chip sold ARM charges a licence fee for its chip designs and then charges recurring royalties for each chip sold.

Earlier this month, media reports suggested that Arm may plan to go public in the US this year, raising at least US$8 billion.

Under ARM's proposed new business model, royalties would be set based on the average selling price of a mobile device, rather than the average selling price of a chip. These changes will mainly relate to ARM's most famous "Cortex-A" design, which is essential for the development of smartphone processors. Charging based on the price of the device is common practice in the telecoms equipment market, with Qualcomm, Nokia and Ericsson all using a similar model for their patents. The problem for ARM, however, is that it established a different sales model a long time ago and is now trying to change its pricing strategy.

The average price of a Qualcomm smartphone computing chip is about $40, compared to $17 for MediaTek and $6 for ZTE, said TechInsights analyst Sravan Kundojjala, adding that ARM charges a royalty of about 1 to 2 per cent for each chip sold, depending on its design. This compares to an average selling price of $335 for a smartphone in 2022. While ARM is unlikely to seek royalties of up to 1 to 2 per cent on the value of each device, people familiar with the matter said the company will set the new pricing in a way that significantly improves overall profits.

So far, one smartphone manufacturer with a leading position in the Chinese market has rejected ARM's plans to raise prices, with executives saying: "The proposed royalties will be at least several times higher than what ARM currently receives. We were told that they want these changes to be implemented from 2024."

Some ARM customers, such as Apple, are both chipmakers and device manufacturers and have special licensing and royalty agreements with ARM. Executives with knowledge of Apple's recent discussions said the company was not involved in discussions about changing ARM's business model.

ARM, SoftBank, Qualcomm, MediaTek, Ziguang Zhanrui, Xiaomi and OPPO would not comment.