Apple pays Arm less than 30 cents per chip in royalties, new report says

News
By Andrew E. Freedman
published

The lowest rate of Arm's customers.

Arm logo on an iPhone
(Image credit: Jaap Arriens/NurPhoto via Getty Images)

Apple is known for being a tough business partner with its vendors, and a new report suggesting the company has negotiated a surprisingly small royalty rate with Arm, whose tech Apple uses to make the processors in its many devices, confirms that.

According to a report from The Information, Apple is paying Arm "less than 30 cents per device" to use Arm-based chips in laptops, phones, tablets, watchers, smart speakers and other devices. This is reportedly the smallest royalty fee structure among the companies that use Arm's smartphone chip designs, adding up to less than 5% of Arm's sales. In comparison, that's about half of what Qualcomm and Mediatek — which the report says are Arm's two biggest customers — pay.

The article paints Arm (and parent company, SoftBank) as — unsurprisingly — annoyed by the arrangement. The Information reports that when SoftBank purchased Arm in 2016, CEO Masayoshi Son looked to restructure the deal and raise rates, but failed to do so.

Arm licenses chip designs to companies like Apple to design chips. Other companies may use Arm's chip designs wholesale, however. Arm originally started as a joint venture between multiple tech companies — of which Apple was a founding member.

Apple and Arm appear to have no plans to separate. In September, Arm announced that it and Apple had entered a long-term agreement "that extends beyond 2040[.]" That's a long period in tech, and — according to The Information's sources — far beyond the usual five-year term. But Apple has also reportedly looked into the open-standard RISC-V architecture (which wouldn't require any royalty payments at all) — potentially to give it leverage with Arm. We've seen Apple post jobs for RISC-V programmers before.

Apple uses Arm cores in chips across a variety of devices. Beyond the M-series system-on-chips in Macs (and some iPads) and A-series chips in iPhones (and other iPads), there are the system-in-packages in the Apple Watch (such as the S9 in the Apple Watch Ultra 2 and Series 9) and HomePod.

Working with Apple provides Arm and other vendors with a big boost in credibility. But the company is also known for cost-reducing strategies that often force vendors to lower prices, or — sometimes — lose money. It seems that Apple has also brought Arm more customers, which The Information claims looked to emulate Apple's success — making for a complicated partnership that may span decades more. 

Andrew E. Freedman

Andrew E. Freedman is a senior editor at Tom's Hardware focusing on laptops, desktops and gaming. He also keeps up with the latest news. A lover of all things gaming and tech, his previous work has shown up in Tom's Guide, Laptop Mag, Kotaku, PCMag and Complex, among others. Follow him on Threads @FreedmanAE and Mastodon @FreedmanAE.mastodon.social.

29 Comments Comment from the forums
  • JamesJones44
    Apple actually already does use RISC-V for some of their IC chip designs. I wouldn't put it past Apple to switch to RISC-V more heavily if they felt terms were unfavorable given they are only using the instruction set and not chip designs.
    Reply
  • ekio
    Yes and that’s why ARM stock price is very overrated.

    Better bet on risc-v that will not crumble if they don’t get multiple bilions to just run idle…
    Reply
  • Bluetooth!
    Apple is not using ARM’s chips, it’s only using the ISA. Also ARM has used some of the new ISA commands that Apple has made. Thus, the price is not that low and not compareable with those usimg ARM’s chip designs.
    Reply
  • JTWrenn
    I say put the screws to them now rather than later. They don't have anything they can jump to fast enough to not lose money so you have a shot now...if contract is coming up. Wait another 5 to 10 and you may have risc-v or some other options up and running and end up in a bind.

    This also really shows that Apple needs to be broken up. Their market power and capital give them too much power in negotiations and break competition by them getting every sweet heart deal. Anti trust is dead.
    Reply
  • TCA_ChinChin
    JamesJones44 said:
    Apple actually already does use RISC-V for some of their IC chip designs. I wouldn't put it past Apple to switch to RISC-V more heavily if they felt terms were unfavorable given they are only using the instruction set and not chip designs.
    Really? I didn't know they did that even for some of their less complex ICs. Thats cool to know.
    Reply
  • hecksagon
    In this case I can almost justify that. Apple only licenses the instruction set. The chip design itself is entirely Apple's.
    Reply
  • Bluetooth!
    hecksagon said:
    In this case I can almost justify that. Apple only licenses the instruction set. The chip design itself is entirely Apple's.
    Apple also did show with their own chip designs, that ARM was just as good as an ISA as X86. The attention ARM has gotten after the M chips came from Apple are probably wort a lot to ARM!
    Reply
  • thestryker
    I'd love to know what the royalties look like on the Qualcomm architecture license if Arm is willing to fight them in court while giving Apple this deal. My guess is that Arm is either trying to maintain the current royalties from Qualcomm using Arm designs instead of their own or Qualcomm's deal is even better than Apple's.
    Reply
  • Bluetooth!
    thestryker said:
    I'd love to know what the royalties look like on the Qualcomm architecture license if Arm is willing to fight them in court while giving Apple this deal. My guess is that Arm is either trying to maintain the current royalties from Qualcomm using Arm designs instead of their own or Qualcomm's deal is even better than Apple's.
    The fight with Qualcomm is that they bought a startup with a deal with ARM, that QCom wants to keep, but ARM said was void after the takeover
    Reply
  • bit_user
    Apple has also reportedly looked into the open-source RISC-V architecture (which wouldn't require any royalty payments at all) — potentially to give it leverage with Arm.
    @JarredWaltonGPU , sorry to bother you, but could you please let Andrew know it's an open standard, not open source? He frequently makes this mistake, and it only spreads confusion among readers.

    Also, I think the article doesn't sufficiently distinguish between the architecture license, under which Apple designs its own cores vs. the full core implementations being used in the SoCs currently made by Qualcomm and MediaTek. I think this explains why ARM has been so desperate to renegotiate the terms of Qualcomm's architecture license, as it moves back to designing its own cores (i.e. via Nuvia).

    If it's really true that the finished core designs only cost Qualcomm about twice as much as an architecture license would, I'm actually quite surprised! There's a world of difference in how much it costs ARM to design cores vs. just letting people use their patents - and that gets to the heart of the difference between license types.
    Reply