Arm makes play to produce its own chips with prototype

This announcement comes ahead of the SoftBank-owned group gearing up for its much-anticipated IPO later this year.

Arm is reportedly teaming up with its existing manufacturing partners to engage in what sources call ‘the most advanced chipmaking effort’ the British group has ever embarked upon. This is a departure from the company’s normal model, as they usually just sells its designs to chip manufacturers rather than develop and produce the semiconductors themselves.

The company is known for its Arm architecture, which is ubiquitous in smartphones, tablets, smart TVs, and other electronic devices. The company licenses its technology to other companies such as Apple, Samsung, Qualcomm, and Nvidia to then use in its chips rather than manufacturing its own products.

Yet Arm has previously built some test chips with partners including Samsung and Taiwan Semiconductor for software training purposes, but its newest chip is due to go beyond that. Having been in development for six months, Arm has also formed a bigger team and is targeting the product at chip manufacturers more than software developers.

The company has built a new “solutions engineering” team, led by chip industry veteran and former Qualcomm and NXP Semiconductors employee Kevork Kechichian, that will lead the development of these prototype chips for mobile devices, laptops and other electronics.

Although there is reportedly no plans to sell or license the product and that the chip is only a prototype, the news has sparked fears in the semiconductor industry about future competition. As if it ends up selling the product, Arm could become competitor to companies that are some of its biggest customers.

This previous play of neutrality is what has lead to Arm’s previous success, as it can work across the aisle with big telco customers including Qualcomm, MediaTek and Apple, and as a result, its products are found in 95% of smartphones.  

Yet this signals a wider push by owner SoftBank’s for Arm to seek out changes to its commercial practices and increase growth. The chip designer has sought to increase prices and overhaul its business model by charging royalties to device-makers rather than some of its chipmaker customers.

This is seen as a diversifying attempt as currently, Arm’s top 20 customers accounted for 86% of revenues last year, so when they clashed with one of its largest customers Qualcomm over alleged misuse of designs, alarm bells began ringing.

If that wasn’t enough to spoke its customers, Arm’s clients are also apparently concerns that chips made by Apple, Arm’s largest customer, are outperforming the competition.