Arm wants more than $0.30 per iPhone from Apple, but won't get it

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in General Discussion

Following Arm's recent initial public offering, it has reportedly been unsuccessfully pressing Apple to pay more than $0.30 per iPhone for its intellectual property.




Apple and Arm have a history that goes back decades to the Newton era. Back in the late 1980s, Apple even owned 43% of the company, but it steadily sold off its shares through the next decade.

Most recently, Arm issued its first IPO, and according to Reuters, Apple has invested somewhere between $25 million and $100 million.

Consequently, a new report from The Information that initially describes Arm as a straightforward supplier to Apple is unclear. Nonetheless, the report concentrates on the intellectual property licensing fees that Apple pays Arm.

According to Wednesday's report, Masayoshi Son, CEO of Arm's parent company SoftBank, gathered management to lecture them about how little money Apple pays.

Reportedly, Son told Arm management that Apple pays more for what The Information describes as "the piece of plastic that protects the screens of new iPhones" than it does to Arm.

Six years later, and after a blockbuster intellectual property licensing deal that will run for decades, Apple is reportedly paying Arm under 30 cents per device. This is said to be the lowest rate that any firm has with Arm, and specifically around half of what Qualcomm and Mediatek pays.

Apple is said to account for under 5% of Arm's total sales, and in the financial year ending March 31, 2023, Arm reported $524 million net income.

Apparently, Son is still waving an iPhone around in meetings, according to unspecified sources, unhappy at how Arm can be earning so comparatively little when its processors are in so many devices.

At some point since 2016, Softbank's Son phoned Tim Cook to say that Arm would be raising its prices. Reportedly, Cook's staff just referred Son to the contract Apple had with Arm.

With that door shut, Son tried getting Arm to raise prices with every other company it works with, and those firms pushed back enough that the plan was scrapped.

That contract between Apple and Arm was due to expire in 2028. The two companies have since signed "a new long-term agreement with Apple that extends beyond 2040," said Arm in September 2023, "continuing our longstanding relationship of collaboration with Apple and Apple's access to the Arm architecture."

Read on AppleInsider

tmay

Comments

  • Reply 1 of 15
    tmaytmay Posts: 6,238member

    Following Arm's recent initial public offering, it has reportedly been unsuccessfully pressing Apple to pay more than $0.30 per iPhone for its intellectual property.




    Apple and Arm have a history that goes back decades to the Newton era. Back in the late 1980s, Apple even owned 43% of the company, but it steadily sold off its shares through the next decade.

    Most recently, Arm issued its first IPO, and according to Reuters, Apple has invested somewhere between $25 million and $100 million.

    Consequently, a new report from The Information that initially describes Arm as a straightforward supplier to Apple is unclear. Nonetheless, the report concentrates on the intellectual property licensing fees that Apple pays Arm.

    According to Wednesday's report, Masayoshi Son, CEO of Arm's parent company SoftBank, gathered management to lecture them about how little money Apple pays.

    Reportedly, Son told Arm management that Apple pays more for what The Information describes as "the piece of plastic that protects the screens of new iPhones" than it does to Arm.

    Six years later, and after a blockbuster intellectual property licensing deal that will run for decades, Apple is reportedly paying Arm under 30 cents per device. This is said to be the lowest rate that any firm has with Arm, and specifically around half of what Qualcomm and Mediatek pays.

    Apple is said to account for under 5% of Arm's total sales, and in the financial year ending March 31, 2023, Arm reported $524 million net income.

    Apparently, Son is still waving an iPhone around in meetings, according to unspecified sources, unhappy at how Arm can be earning so comparatively little when its processors are in so many devices.

    At some point since 2016, Softbank's Son phoned Tim Cook to say that Arm would be raising its prices. Reportedly, Cook's staff just referred Son to the contract Apple had with Arm.

    With that door shut, Son tried getting Arm to raise prices with every other company it works with, and those firms pushed back enough that the plan was scrapped.

    That contract between Apple and Arm was due to expire in 2028. The two companies have since signed "a new long-term agreement with Apple that extends beyond 2040," said Arm in September 2023, "continuing our longstanding relationship of collaboration with Apple and Apple's access to the Arm architecture."

    Read on AppleInsider

    Something under $70 m annually would be a big win for Arm, but a rounding error for Apple.

    Arm should remember that Apple, and others with architectural licenses, established the Arm brand of today. Let the latecomers pay, or move to RISK-V.
    watto_cobra
  • Reply 2 of 15
    Yes -and just as Fujitsu designed the SVE SIMD extensions for ARM, it was Apple that created the 64-bit ARM ISA (v8+), totally redesigning it in the process, as they were the first company on Earth to require 64-bit ARM CPUs.  We used to joke about how the new ISA was "ARM" in name only.  So in theory, they could license the ISA to ARM.  And of course, Apple hasn't used the ARM microarchitecture since the Newton - it's a total Apple design.  So what benefit does Apple get from the ARM name?  Just participation in a wide software ecosystem, where people have already created "ARM" versions of popular software, vs the smaller number of companies who would make things for "Apple Silicon".

    byronlronnbaconstangkillroywatto_cobraAlex1Njony0
  • Reply 3 of 15
    blastdoorblastdoor Posts: 3,209member
    I wonder why anyone would think Apple would voluntarily pay more… surely ARM must have offered *something* to justify higher royalties. If not, one must question their competence.

    I suspect that the ARM ISA is of limited value to Apple. Software compatibility with other ARM chips is almost completely irrelevant to Apple. The only value to Apple is that they don’t have to develop their own ISA or switch to another. But Apple could pretty easily do either of those things if necessary. So it seems to me ARM has no chance of getting more from Apple.
    williamlondonInspiredCoderonntdknoxkillroywatto_cobra
  • Reply 4 of 15
    XedXed Posts: 2,460member
    Change your licensing fees, ARM.
    edited November 2023 watto_cobra
  • Reply 5 of 15
    y2any2an Posts: 181member
    The timeline for the current agreement is longer than the timeline for Apple to stay on a given processor architecture. Just saying…
    watto_cobra
  • Reply 6 of 15
    Those other companies use more than just the ARM ISA. Apple has their own chip designs.
    watto_cobra
  • Reply 7 of 15
    1. ARM wouldn't exist without Apple--ARM started with the Newton.
    2. Apple publicly invested >$700 million in ARM just before their IPO a couple months ago--could that have possibly helped their share price go higher?
    3. Apple and ARM agreed to a long-term deal (till 2040!) just before their IPO a couple months ago--could that have possibly helped their share price go higher?
    4. ARM could have held out for higher royalties before agreeing to said long-term deal just a couple months ago, but they didn't. Hmmm.  
    5. Apple does all design and fabrication of their hyper-customized "ARM" chips. ARM does very little. Apple has an “architecture license” with ARM, which allows the company to design its own cores using the ARM instruction set. In other words, Apple does all the heavy lifting in producing their highly customized ARM chips.
    ronnkillroywatto_cobrajony0
  • Reply 8 of 15
    Also, this is just for the "license".  ARM isn't supplying anything physical.. just the intellectual ideas, which @blastdoor points out, is largely from Apple in the first place.  If their product or rate was too high in the first place, they wouldn't have been considered an option.  Decades later, ARM wants more.  Of course.  230+M iPhones last year is a $70M annual check to ARM for providing decades old IP.
    watto_cobra
  • Reply 9 of 15
    XedXed Posts: 2,460member
    Synth2 said:
    1. ARM wouldn't exist without Apple--ARM started with the Newton.
    2. Apple publicly invested >$700 million in ARM just before their IPO a couple months ago--could that have possibly helped their share price go higher?
    3. Apple and ARM agreed to a long-term deal (till 2040!) just before their IPO a couple months ago--could that have possibly helped their share price go higher?
    4. ARM could have held out for higher royalties before agreeing to said long-term deal just a couple months ago, but they didn't. Hmmm.  
    5. Apple does all design and fabrication of their hyper-customized "ARM" chips. ARM does very little. Apple has an “architecture license” with ARM, which allows the company to design its own cores using the ARM instruction set. In other words, Apple does all the heavy lifting in producing their highly customized ARM chips.
    1) That's woefully inaccurate. This was the first product to use ARM architecture.

    https://en.wikipedia.org/wiki/Acorn_Archimedes

    2) I stopped reading after the first incorrect line.
    xyzzy01purplepearwilliamlondontdknoxspherickillroyAlex1N
  • Reply 10 of 15
    Apple would be really stupid to play games with ARM.    Apple moved to using its own chips and all are based on ARM something you don't easily change.    Apple has ridiculous profit margins and biggest tech company around they could easy pay ARM more and barely notice it, but losing ARM would cost them in a lot trying to find another partner.    Tim Cook emulating Steve Jobs bully tactics could really backfire now that you're so deep into silicon business for your own products. 
    williamlondon9secondkox2
  • Reply 11 of 15
    chadbagchadbag Posts: 1,994member
    Toortog said:
    Apple would be really stupid to play games with ARM.    Apple moved to using its own chips and all are based on ARM something you don't easily change.    Apple has ridiculous profit margins and biggest tech company around they could easy pay ARM more and barely notice it, but losing ARM would cost them in a lot trying to find another partner.    Tim Cook emulating Steve Jobs bully tactics could really backfire now that you're so deep into silicon business for your own products. 
    Apple is not going to loose ARM.  They have some sort of perpetual architecture license.  The contracts (now through 2040!) are about how much the royalty is and all that.  And are well cemented for almost 20 years.  
    ronnwilliamlondontdknoxbaconstangkillroywatto_cobra
  • Reply 12 of 15
    They aren’t going to get a penny more than what they contracted for.
    ronnkillroy9secondkox2watto_cobraAlex1N
  • Reply 13 of 15
    Toortog said:
    Apple would be really stupid to play games with ARM.    Apple moved to using its own chips and all are based on ARM something you don't easily change.    Apple has ridiculous profit margins and biggest tech company around they could easy pay ARM more and barely notice it, but losing ARM would cost them in a lot trying to find another partner.    Tim Cook emulating Steve Jobs bully tactics could really backfire now that you're so deep into silicon business for your own products. 
    So much wrong here. 

    Apple isn’t playing games. Arm is. Apple has a legal and binding contract that now goes on for about another 20 years, by which apple will likely have its own risc foundation, negating the need for the old minutiae of arm that apple builds its chips on. 

    Iit doesn’t matter one bit how much money apple makes or has. They don’t owe any of it to anyone. Just because they can pay doesn’t mean they should. Apple isnt a charity, giving out free money to losers who push for it. They’re a profitable business, in large part because they are very careful financially. 

    Bro. It was the incompetent arm ceo trying to bully Tim. Not the other way. And those who try to bully apple don’t fare too well. 

    Apple has a long term ahead with free rein to keep building their arm based chips. So no one is worried. At all. 
    edited November 2023 watto_cobra
  • Reply 14 of 15
    To borrow a term, SoftBank and Masayoshi Son are "beleaguered."  For real.

    The past few years have not been good for the company, and just looking at Arm alone, there was the failed sale to Nvidia, and conflict with its Chinese venture, where the CEO went rogue.

    And their big bet on WeWork, which I believe they even doubled down on…well, that turned out to be really ugly.


    watto_cobra
  • Reply 15 of 15
    Given that it's nothing but a paid permission slip, not transferred value, I'd like to just put out there that I'd be OK if Apple gave me 30 cents per iPhone.
    williamlondonwatto_cobraAlex1N
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