Under the current model Arm charges royalties of 1-2 per cent based on the value of the chip. The new proposed model would implement a big change, where Arm would charge royalties based on the average selling price of the devices. This would mean that instead of charging Qualcomm, Arm would now charge manufacturers like Motorola and Samsung.
The average price for a smartphone chip from Qualcomm is $24, while the average price for a smartphone sold in the US was $299 for 2022. Based on this, Arm means to boost their profits, granted if they keep the royalties inline of where they are today.
In their Q3 FY22 earnings, Arm reported total revenue of $746 million, up 28 per cent year on year with all of that stemming from licensing and royalties. Some readers might remember Nvidia's attempt of taking over Arm for the sum of no less than $40 billion, a deal that ultimately fell through after failing to overcome regulatory issues.
The move might backfire on Arm and give an opportunity to RISC-V, an open source instruction set architecture that launched in 2015, but has only seen limited use outside of IoT devices. Arm has a monopoly on the mobile market, and even Apple has switched to Arm across all its platforms.