Apple’s Arm Advantage: Securing Cutting-Edge Chips at Bargain Prices

It is well-known that Apple is a notoriously tough negotiator with its suppliers. Presently, Apple extensively utilizes chips based on the Arm architecture across a multitude of devices, and a recent report has revealed a surprisingly low fee rate in Apple’s patent licensing agreement with Arm.

According to a report by The Information, Apple pays less than 30 cents per device to Arm, encompassing a range of products including laptops, smartphones, tablets, smartwatches, smart speakers, and other devices powered by Arm chips. Among all chip design companies licensed by Arm, Apple enjoys the lowest fee rate, contributing less than 5% to Arm’s annual revenue. In contrast, Arm’s largest clients, Qualcomm and MediaTek, pay double the rate Apple does.

When the SoftBank Group acquired Arm in 2016, CEO Masayoshi Son aimed to renegotiate and raise the fee rates, but to no avail. Arm was initially a joint venture funded by multiple technology companies, with Apple being one of its founding members. The future suggests no separation between the two. In September this year, Apple and Arm reached a long-term patent licensing agreement extending well beyond 2040, far exceeding the typical five-year term common in the tech industry.

Beyond the Arm architecture, Apple is also exploring the open-source RISC-V architecture, as evidenced by past job postings. On one hand, the RISC-V architecture requires no patent fees, potentially reducing costs further, and on the other hand, it could serve as a bargaining chip in collaborations with Arm and other companies. From the current perspective, the intricate relationship between Apple and Arm seems poised to continue for decades.