One of the main reasons why Apple moved to make its own Arm chips was the significant savings in terms of licensing costs (royalties) compared to what it paid to Intel. It’s no secret that Apple enjoys a good market position to get the best out of your suppliers. In other words, try to pay as little as possible for any component that makes up your device. We now know that the company pays a small licensing fee for the production of both mobile chips and for laptops and desktops.
According to a report from The Information, Apple is paying Arm “less than 30 cents per device” which uses a chip based on the Arm architecture. It affects laptops, desktop computers, iPhones, iPads, watches, smart speakers and other devices. Basically, Apple is the company that sells all the its products are the most expensive, but it is the one that pays far less royalties for the use of Arm chip designs. So despite the sales enjoyed by Apple, for Arm, this client is almost cannot contribute 5% of your total income. To give us context, Qualcomm and MediaTek’s two biggest customers pay almost double.
Even if paying double the amount is close to 60 cents, it seems a bit much. However, multiply 0.60 by hundreds of millions into chips
the monetary difference is relatively small.
Arm and its parent company are not happy with the royalties Apple is paying
These reports also indicate dissatisfaction with Arm and its parent company, Japanese Softbank. It was revealed that when SoftBank bought Arm in 2016, the company’s CEO, Masayoshi Son, tried to restructure the agreement and increase rates. Apparently, with these complaints now it is known that he did not succeed. Now with an Apple that also makes Arm chips for its laptops and desktops, this is a significant amount of money lost.
In September, Arm announced that it had signed a long-term agreement with Apple “which will exceed the year 2040“. That’s a long time for unmatched technology. For reference, typical timelines are usually about five years. However, Apple is also testing the RISC-V architecture. This architecture is focused on high performance and, most importantly, does not include the payment of any royalties. This influenced the Arm deal, and even more so when it published job offers seeking RISC-V programmers. Increasing the royalty cost of using Arm’s design will facilitate this transition.
Working with Apple gives Arm, and other suppliers, a huge credibility boost. But the company is also known for your cost reduction strategies. This often forces sellers to lower prices, and even lose money. Obviously, Apple also brought more customers to Arm which seeks to emulate the success of Apple. These companies are Qualcomm or MediaTek in the PC field. That gave rise to a complex partnership that could last for several more decades.