- Citing sources familiar with the matter, the Financial Times indicates that Arm wants to change its strategy to collect its royalties
- Instead of collecting these royalties from the manufacturers of chips for smartphones, the company would like to collect these from the manufacturers of smartphones.
- As a smartphone is worth more than its chip, one would expect Arm’s royalty costs to rise.
Will smartphone prices skyrocket? According to an article recently published by the Financial Times, it is possible. And this time it is neither due to inflation nor to a shortage. This price increase could instead be caused by a decision by the Arm company, which provides the technologies from which the chips of smartphones are made.
Whether you use an iPhone or an Android smartphone, you use Arm’s technologies. Indeed, it is this company’s designs that chipmakers use. Arm, on the other hand, makes money by collecting royalties from these chipmakers. And according to the explanations of the Financial Times, currently, these royalties are calculated according to the value of the chip.
But as Arm plots his IPO, he wants a bigger slice of the pie. The British newspaper explains that instead of collecting royalties from chip manufacturers, Arm would now like to collect them from smartphone manufacturers. And the calculation would no longer be based on the value of the chip, but on the value of the smartphone that uses this chip.
From 2024?
Arm would also have already warned the companies MediaTek, Unisoc and Qualcomm (providers of chips for smartphones), as well as some smartphone brands, including Xiaomi and Oppo. The information is, of course, to be considered with caution, since it comes from unofficial sources. However, it seems that Arm’s goal is to generate more revenue through his royalties. But for the smartphone market, it could lead to higher prices, if manufacturers decide to pass on their rising costs to consumers.
In its article, the Financial Times quotes a senior official of a leading Chinese smartphone brand (who remained anonymous). And he would expect the royalties paid to be “several times better than what Arm currently gets”. The change could apply from 2024, according to this source.
