ARM signs Meta as first chip product customer, says report
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ARM has signed Meta Platforms Inc., formerly Facebook, as its first customer for a chip product as it transitions from being only a licensor of chip IP, according to the Financial Times.
The chip, a server CPU for data centers, will be customizable for multiple customers with Meta as the first, the report said. The chip is due to be announced later this year, it added. Since its formation in 1990 ARM has focussed on licensing circuits designs and its architecture to chip companies in return for royalties on subsequent chip sales.
A change in business model to include the provision of fully packaged processors would see ARM compete with its customers for the first time and is likely to be significant market disruptor.
Susan Li, Meta’s CFO, said in an earnings call last month that her company was extending its custom silicon efforts to AI training workloads. This is an activity for which Meta will have in the past typically purchased thousands of Nvidia chips such as Hopper and Blackwell for use in its datacenters; chips which cost more than US$10,000 each.
No details of the ARM processor were reported so it is unclear the degree to which it may be seen as competition by Nvidia.
The fact that the initial design may be exclusive to Meta lets ARM occupy ground somewhere between AI licensor, design services company and chip product supplier. Importantly, it would likely allow ARM to capture much more of the chip value than licensing an IP core to a chip company. The latter activity is usually levied as a royalty of a few percent of the value of each chip sold. The chip will be manufactured for ARM by a foundry, such as TSMC, the report said
There have been rumors over the last couple of years that ARM has been considering changing its business model to include being a chip product vendor. The possibility was mentioned as Nvidia sought to buy ARM from its parent SoftBank Group, a deal that eventually collapsed in February 2022. The fact that high-performance processor components are now often designed around multiple chiplets, potentially from multiple sources, has also made the environment for business models more complex.
A Nikkei report in May 2024 indicated that a prototype AI processor chip product would be completed in spring 2025 and be on sale in fall 2025. That prediction is now supported by the FT report
Such a move by ARM is not without risks. By competing with its IP licensees ARM could prompt an exodus to RISC-V and other processor architectures. On the other hand, legacy design wins are usually resilient and it would likely take years, even a decade or more, for royalties on ARM chips to disappear.
Although listed on NASDAQ, ARM is majority-owned by SoftBank Group, which has reportedly been pushing CEO Rene Haas to increase profits by using its key position in the semiconductor industry. A mixture of increased royalty rates imposed by ARM and the prospect of ARM as a competitor may have been behind a legal battle currently being fought between ARM and a leading customer Qualcomm Inc.
One startup company that ARM would certainly be competing with is Ampere, which has designed server processors based on the ARM architecture. However, SoftBank is reportedly in talks over a potential acquisition of Ampere at a valuation of about US$6.5 billion.
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