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Reuters: "Exclusive: Arm raises prices on chip technology for some customers, sources say"


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I'm putting this in "Video Game Technology" since the SoC (system on a chip) on the Nintendo Switch (Tegra X1 for the original and the Tegra X1+ for the revision and the Nintendo Switch Lite) use Arm CPUs. And of course, the SoCs on all mobile smartphones use Arm CPUs, many people play games on mobile smartphones, and many video game companies (Nintendo and Square Enix being some examples) develop and/or port games to mobile smartphones.

https://www.reuters.com/article/us-softbank-group-arm-exclusive/exclusive-arm-raises-prices-on-chip-technology-for-some-customers-sources-say-idUSKCN24G1RM

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(Reuters) - SoftBank Group Corp-owned (9984.T) semiconductor technology supplier Arm Ltd has moved to raise licensing fees for some customers in recent negotiations, four people familiar with the matter told Reuters.

In recent talks, Arm's sales representatives have pressed for price hikes that would boost overall license costs for some customers by as much as four times, two people familiar with the matter said.

License costs vary, but can total millions of dollars for critical designs such as complex computing cores. The hikes have prompted some licensees to consider non-Arm alternatives, two of the people told Reuters, requesting anonymity to discuss the nonpublic talks.

Arm said it does not comment on pricing negotiations.

The company has invested heavily in new technology to help customers such as Marvell Technology Group (MRVL.O) penetrate new markets such as data centers. Last year Arm began a "flexible access" program to give customers access to a broad range of its technology with lower upfront costs.

Arm supplies the intellectual property in chips that power most of the world's smartphones, including those from Apple Inc (AAPL.O) and Samsung Electronics Co Ltd (005930.KS). It is expanding into chips for self-driving cars and networking technology, among other markets.

SoftBank bought Cambridge, England-based Arm in 2016 for $32 billion, its largest-ever purchase, and signaled it wanted to re-list the company by 2023.

The Wall Street Journal reported here this week that SoftBank had hired Goldman Sachs Group Inc to explore alternatives including a full or partial sale of Arm. SoftBank Chief Operating Officer Marcelo Claure told the Financial Times here on Tuesday Arm would go public when SoftBank has realized "most of the value" from the chip firm, but said "I don't see Arm as a public company in the next 12 months."

The outcome of an Arm public listing could be critical to SoftBank because 25% of the chip firm is held by the bank’s $98.6 billion vision fund. The fund's investments had lost $17.3 billion in value as of March 31, according to SoftBank's most recent financials, compared with a 727.3 billion yen ($6.8 billion) loss in value at the end of 2019. The Vision Fund declines were driven by major investments such as Uber Technologies Inc (UBER.N) and WeWork.

License fees, which chip designers pay to access Arm's technologies, are driving its revenue growth. Such revenue grew 6.4% to $582 million in its most recent fiscal year, even as revenue from royalties on chips made with Arm technologies fell 1.5% to $1.08 billion.

SoftBank acquired Arm in part to capitalize on an expected boom in the internet of things, or IoT, in which everyday devices from traffic lights to refrigerators are expected to connect to the internet.

But in IoT, the company has faced competition from an "open-source" technology called RISC-V that can be used by rivals who charge chip designers lower prices, or even for free by the chip designers themselves. The novel coronavirus pandemic has also slowed spending plans for IoT, research firm IDC said.

Last week, Arm spun off two IoT software businesses back into SoftBank to focus on its core chip technology.

With IoT revenues constrained by competition and economic headwinds, Arm has turned to raising prices for technologies used in more complex chips, people familiar with license discussions said.

"It's created a lot of tension for us," one Arm licensee told Reuters, saying the hikes seemed out of proportion to the improvements in the technology.

Edited by Dakhil
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  • 3 weeks later...
Posted (edited)

There's an update to this story. Nvidia is apparently offering $32 billion (USD) to acquire Arm and is in "advanced talks" with Softbank to acquire Arm.

https://www.bloomberg.com/news/articles/2020-07-31/nvidia-said-in-advanced-talks-to-buy-softbank-s-chip-company-arm?srnd=technology-vp

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Nvidia Corp. is in advanced talks to acquire Arm Ltd., the chip designer owned by SoftBank Group Corp., according to people familiar with the matter.

The two parties aim to reach a deal in the next few weeks, the people said, asking not to be identified because the information is private. Nvidia is the only suitor in concrete discussions with SoftBank, according to the people.

A deal for Arm could be the largest ever in the semiconductor industry, which has been consolidating in recent years as companies seek to diversify and add scale. Cambridge, England-based Arm's technology underpins chips in products including Apple Inc. devices and connected appliances. SoftBank acquired the business for $32 billion in 2016.

No final decisions have been made, and the negotiations could drag on longer or fall apart, the people said. SoftBank may gauge interest from other suitors if it can't reach an agreement with Nvidia, the people said. Representatives for Nvidia, SoftBank and Arm declined to comment.

Any deal with Nvidia, which is a customer of Arm, would likely trigger regulatory scrutiny as well as a wave of opposition from other users of the company's technology. Other Arm clients could demand assurances that a new owner would continue providing equal access to Arm's instruction set. Such concerns resulted in SoftBank, a neutral company, buying Arm the last time it was for sale.

Divestment Drive
Billionaire Masayoshi Son has been selling some of SoftBank's trophy assets as seeks to pay down debt at the Japanese conglomerate. SoftBank has offloaded part of its stake in Chinese internet giant Alibaba Group Holding Ltd. and a chunk of its holdings in wireless carrier T-Mobile US Inc.

SoftBank has been exploring options to exit part or all of its stake in Arm through a sale or public stock listing, Bloomberg News has reported. The chip-design company could go public as soon as next year if SoftBank decides to proceed with that option, people with knowledge of the matter have said.

Arm is becoming more valuable as the company pushes for its architecture to be used in more smart cars, data centers and networking gear. The company could be worth $44 billion if it pursues an initial public offering next year, a valuation that may rise to $68 billion by 2025, according to New Street Research LLP.

Nvidia, based in Santa Clara, California, is the world's largest graphics chipmaker. Its shares rose 1.4% in New York trading Thursday, giving the company a market value of about $261 billion. The stock has more than doubled over the past year.

Edited by Dakhil
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