Arm may adjust its licensing business model as early as 2024

Reports suggest that Arm has recently informed several large-scale customers of a change in its licensing business model. Instead of charging chipmakers based on the value of the processor itself, Arm will now collect licensing fees from end-device manufacturers based on the value of the actual application device.

In contrast to the previous model, which charged licensing fees as a percentage of the application processor’s unit price, Arm’s future licensing model will adjust to a revenue-sharing arrangement based on the sale price of the actual end-user devices. This approach mirrors Qualcomm’s processor technology licensing fee calculation.

The shift in the licensing business model may be related to Softbank’s desire to compensate for recent losses by increasing licensing fees. Market research consultant SemiAnalysis previously suggested that Arm could change its chip design patent licensing method, moving away from directly charging chipmakers and instead collecting fees from end-device manufacturers that utilize its processors.

Moreover, future licensing agreements may require the adoption of Arm’s Mali GPU, Ethos NPU, and other architectural designs, precluding the use of third-party technology combinations such as Qualcomm’s acquired Adreno GPU, AMD’s licensed RDNA architecture GPU for Samsung, or Imagination Technologies’ PowerVR GPU.

Market analysts have speculated that if Arm adopts the new licensing business model, the increased costs will likely be passed on to consumers purchasing end-device products, resulting in even higher licensing fees for already expensive mobile devices.

Under Arm’s new licensing model, directly affected chipmakers will include MediaTek, Qualcomm, and custom chip designers like Xiaomi and OPPO. However, companies like NVIDIA and Apple, which license Arm’s instruction set and create their chip architecture designs independently, may not be immediately impacted.

According to reports, Arm may begin implementing the new licensing business model as early as 2024. However, the change could face opposition from numerous customers and potentially provoke protests from many end-device manufacturers who have adopted Arm architecture processors.

Arm has not yet responded to these rumors.