Report: Arm proposes change to IP royalty model

Report: Arm proposes change to IP royalty model

Business news |
By Peter Clarke

Processor intellectual property licensor Arm Ltd. is looking to increase sales by changing in its royalty model from one based on chip value to one based on equipment value, according to the Financial Times.

Arm, owned by SoftBank Group, is making the move specifically in the smartphone area where it has a near-monopoly. The change could be brought in next year, the report said.

It is thought that Masayoshi Son, CEO of SoftBank, believes that Arm has not extracted as much value from its patents as it could have done and wants to boost Arm’s profit forecasts ahead of an initial public offering of shares. This could help maximize the money raised by an IPO which SoftBank is eager to receive to put the company on a sound footing

The revised scheme would be designed to give Arm a significantly greater financial return for providing its cores, the report said. The companies impacted such as MediaTek, Unisoc and Qualcomm, and multiple Chinese smartphone makers including Xiaomi and Oppo, have not welcomed the change. There is speculation that it could hasten the adoption of RISC-V, an open-source and more recent processor architecture, for smartphones applications.

The alternative interpretation is that Arm and SoftBank are determined to obtain maximum value from their near-monopoly and the momentum of their legacy software ecosystem while it remains possible.

The old 1, 2….percent

Typically, Arm has charged 1 to 2 percent of the value of the chips in which its cores are included. Where it has multiple instances there is a sliding scale, such as an octocore chip it is believed there is a sliding discount. While a smartphone application processor might have a value of about US$30 to more than US$100, the system it sits in might be valued at $200 to $1,000.

The percentages that would be set under the new model is not known and would probably be negotiated on per company basis. The Financial Times states that Apple and Samsung, smartphone market leaders, would not be impacted by the change as they have architectural licenses and design their own chips.

The changed royalty scheme would likely not play well with Qualcomm, with which Arm is already in legal dispute over licensing rights and royalties.

Related links and articles:

Financial Times article

News articles:

Arm results shine bright in SoftBank mire

Qualcomm hits back at ARM over lawsuit

ARM sues Qualcomm over Nuvia chip designs

Qualcomm buys Nuvia to take on Apple

Arm London IPO talks paused by SoftBank


Linked Articles