The company builds a test chip in partnership with a factory, sparking fears that it may compete with its largest customers.Arm is developing its own chip to showcase the capabilities of its designs, as the SoftBank-owned group seeks to attract new customers and fuel growth following a blockbuster IPO later this year.
The company will team up with manufacturing partners to develop the new chip, according to people briefed on the move who describe it as the most advanced chipmaking effort the Cambridge-headquartered group has ever embarked upon.
SoftBank is attempting to boost Arm’s profitability and to attract investors for a planned Nasdaq listing in New York.
The company sells its blueprints to chip manufacturers rather than directly getting involved in the production and development of semiconductors. It hopes that the prototype can be used to show the market the power and capability of the designs.
Arm built test chips in the past with partners such as Samsung and Taiwan Semiconductor Manufacturing Co. This was primarily to enable software developers familiarize themselves with new products.
Multiple industry executives have said, however, that the newest chip on which Arm has been working for six months is “more advanced than ever.” Arm also has a larger team to execute the project and is focusing the product more on chip manufacturers than software developers.
According to those briefed about the move, the company has created a “solutions engineering team” that will be responsible for the development of prototype chips used in mobile devices, laptops, and other electronic products.
Kevork Kechichian is the head of Arm’s Solutions Engineering. He joined Arm in February and has been a chip industry veteran since then. He held roles at NXP Semiconductors, Qualcomm and other chipmakers. Qualcomm’s flagship Snapdragon processor was developed by him.
The team will also continue Arm’s efforts to improve the performance and security in designs as well as to increase developer access to Arm products.
The rumblings in the semiconductor sector about Arm’s moves to make chips have raised fears that, if the company makes a chip good enough, it may try to sell it and become a rival to its largest customers, like MediaTek or Qualcomm.
Sources close to Arm claim that the company has no plans to license or sell its product, and is only developing a prototype. Arm declined to make any comments.
Arm’s status as “Switzerland”, the industry leader in semiconductors, would be undermined if it were to start building chips for commercial sale. Arm sells designs to nearly all mobile device chipmakers without directly competing with them.
The neutrality of its model has allowed it to be found in over 95 per cent smartphones. Customers include Qualcomm, MediaTek, and Apple.
“Working with intellectual property is one area, but working on the design and working with partners to make physical chips is another.” Former Arm executives who are familiar with the project said that it was more capital-intensive. “At some future point [Arm] will need to see returns on that massive investment.”
SoftBank’s drive for growth led Arm to change its business practices. The chip manufacturer has tried to increase prices and revamp its business model, charging royalties instead of some of its customers to device makers.
In its annual report, published last week, Arm admitted that “significant concentration” of its customer base was a major risk for its business. Arm’s 20 top customers accounted for 86% of its revenues in the past year. “The loss of just a few key customers could have a significant impact on the group’s future growth”.
This warning was issued as Arm is currently embroiled with a bitter legal battle with Qualcomm, its biggest customer, after Arm accused Qualcomm of using its designs without obtaining the required licence.
Apple, Arm’s biggest customer, is also widely criticized for its in-house chip development, which outperforms those of competitors Qualcomm and MediaTek.
Google thought that it could show the world the best Android OS, so it created the Pixel phone. Microsoft believed it was the master Windows, so it created Surface laptops. Arm believes it can produce the best-in class Arm-based processors, which is better than other chip makers,” Brady Wang, a Counterpoint Research semiconductor analyst, said.
Wang stated that making chips is more difficult than building devices. It will take generations of development effort.