In the realm of smartphone chip technology, Arm Holdings has long been a dominant player, providing the foundational designs for chips used by a vast majority of mobile devices. However, a unique licensing deal struck with Apple in 2010 raised eyebrows and caused friction between the two companies.
Key Highlights:
- Apple negotiated a flat royalty fee per chip with Arm, regardless of the number of Arm cores used.
- This arrangement proved beneficial to Apple as chips became more complex and incorporated multiple cores.
- Arm’s licensing model, typically based on a percentage of chip sales, put other licensees at a disadvantage.
- The deal strained the relationship between Apple and Arm, leading to Arm’s eventual acquisition by SoftBank.
While Arm’s standard licensing model involves charging a royalty based on a percentage of the price of chips sold by its licensees, Apple secured a flat royalty fee per chip, regardless of the number of Arm cores it used. This arrangement proved particularly advantageous to Apple as chips evolved, incorporating multiple cores to enhance performance.
Apple’s decision to design its own custom Arm-based cores, rather than using Arm’s off-the-shelf designs, further exacerbated the situation. By licensing only Arm’s architecture, Apple gained the flexibility to tailor its chips to its specific needs, while paying a lower royalty compared to licensees that relied on Arm’s complete chip designs.
The lopsided deal with Apple caused resentment among other Arm licensees, who felt that Apple was gaining an unfair advantage at their expense. This tension, coupled with Apple‘s growing dominance in the smartphone market, strained the relationship between the two companies.
In 2016, the situation intensified when Apple announced its intention to purchase a chip design firm called Nuvia, a move that threatened Arm’s position in the industry. Arm reportedly considered legal action against Apple, fearing that the Nuvia acquisition would further strengthen Apple’s competitive edge.
The strained relationship between Apple and Arm eventually reached a turning point in 2017 when Arm was acquired by SoftBank, the Japanese telecommunications and investment giant. SoftBank’s acquisition of Arm was seen as a way to protect Arm’s independence and prevent Apple from gaining too much control over the chip design industry.
While the acquisition by SoftBank eased tensions somewhat, the legacy of Apple’s lopsided Arm deal continues to linger. The deal highlights the challenges of balancing the interests of different licensees in a rapidly evolving technological landscape.
Apple’s unconventional licensing deal with Arm for its custom chip designs raised concerns among other licensees and strained the relationship between the two companies. The deal, which involved a flat royalty fee per chip rather than a percentage of chip sales, provided Apple with a significant cost advantage and fueled resentment among other Arm partners. The situation further escalated when Apple acquired Nuvia, a chip design firm, threatening Arm’s position in the industry. The acquisition of Arm by SoftBank in 2017 helped to ease tensions but the legacy of the lopsided deal remains a reminder of the complexities of managing licensing agreements in a competitive technological landscape.
