Apple, recognized for its assertive business approach, reportedly secured a notably modest royalty rate with Arm, the technology provider behind the processors in Apple’s diverse range of devices. A recent report from The Information reveals that Apple is paying Arm “less than 30 cents per device” for the utilization of Arm-based chips in devices such as laptops, phones, tablets, smartwatches, smart speakers, and more.
This royalty fee structure is purportedly the smallest among companies employing Arm’s smartphone chip designs, constituting less than 5% of Arm’s sales. In contrast, it’s approximately half of what Arm’s prominent customers, Qualcomm and MediaTek, reportedly pay.
All About Apple’s Royalty and ARM
The report characterizes Arm and its parent company, SoftBank, as understandably displeased with this arrangement. The Information notes that when SoftBank acquired Arm in 2016, CEO Masayoshi Son aimed to restructure the deal and increase rates but faced difficulties in doing so.
Arm licenses chip designs to companies like Apple for chip development, while others may adopt Arm’s chip designs wholesale. Apple and Arm, despite the reported dissatisfaction, show no indications of parting ways. In September, Arm disclosed a long-term agreement with Apple extending beyond 2040, a noteworthy timeframe in the tech industry, surpassing the typical five-year terms.
However, Apple has allegedly explored the open-standard RISC-V architecture, which requires no royalty payments, potentially as a strategic move to exert influence on Arm. Apple’s utilization of Arm cores extends across various devices, including M-series chips in Macs, A-series chips in iPhones, and system-in-packages in Apple Watch and HomePod.
While collaborating with Apple elevates the credibility of Arm and other vendors, Apple’s penchant for cost-reduction strategies often compels vendors to lower prices or, in some cases, incur losses. Despite potential challenges, Apple’s association with Arm has attracted more customers seeking to emulate Apple’s success, suggesting a complex partnership that may endure for decades, as indicated by sources cited by The Information.