British chip design firm Arm Holdings ARM is developing plans to increase prices by up to 300% and has discussed manufacturing its own chips, marking a significant shift in strategy that could reshape its relationship with major customers like Apple Inc. AAPL and Qualcomm Inc. QCOM.
What Happened: The SoftBank-controlled company aims to boost annual smartphone revenue by approximately $1 billion over a decade through its “Picasso” initiative, according to court documents revealed during a recent trial with Qualcomm, Reuters reported. The strategy, dating back to 2019, centers on increasing royalty rates for its latest Armv9 computing architecture.
Arm CEO Rene Haas has explored expanding beyond the company’s traditional role of selling chip-design blueprints to potentially producing complete chips or chipsets. This move could position Arm as a direct competitor to its current customers, particularly as the company seeks growth beyond its relatively modest $3.23 billion revenue in fiscal 2024.
Internal communications revealed during the trial showed Haas’s confidence in competing against customers if Arm entered chip production. “Rest are hosed,” Haas wrote in a December 2021 message regarding potential competition with companies like Qualcomm.
Why It Matters: The strategy shift comes as Arm explores acquiring Ampere Computing LLC, an Oracle Corp.-backed chip designer which was valued at $8 billion in 2021. This potential acquisition could accelerate Arm’s evolution from a technology licensor to a complete chipmaker, particularly in the server market.
Industry analysts express concern about the implications. “It should send a chill down the spine of their customers,” said Tantra Analyst founder Prakash Sangam, noting the unexpected nature of Arm’s chip-making aspirations.
Price Action: Arm Holdings PLC’s ADR closed at $137.07 on Tuesday, down 2.43% for the day. In after-hours trading, the stock gained 1.26%. Over the past year, the stock has surged by an impressive 100.16%, according to data from Benzinga Pro.
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