Arm to explore designing its own chips, chief executive says

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UK chip company Arm confirmed it was exploring the idea of launching its own chips on Wednesday in a move that would represent a significant shake-up in its relationship with big customers such as Nvidia.

Arm chief executive Rene Haas said the company, which offers the designs that other companies base their chips on, was accelerating its research and development spending as it considers offering “full end solutions” — suggesting it wants to design complete chips.

SoftBank-owned Arm’s designs dominate the smartphone chip ecosystem, with Apple and Samsung using Arm-based chips in their products. Nvidia also incorporates them into its artificial intelligence data centre products.

Yet the desire to take a larger cut of the vast semiconductor industry has prompted Arm to explore moving up the design “stack” towards its own end products.

The Financial Times reported in February that Arm was planning the move.

The market for AI data centre chips is already crowded. Nvidia’s dominance in the AI data centre business has been met with competition from the likes of Amazon and Microsoft, which have designed their own custom chips. Rival providers such as AMD are also seeking a larger share.

SoftBank chief executive Masayoshi Son has placed Arm at the centre of his efforts to capture a larger share of the money being made in the AI boom.

SoftBank has already partnered with OpenAI, Oracle and the UAE’s AI fund MGX in the $500bn Stargate project to build data centres in the US over the next four years.

“Many of the chiplets that are being developed are mostly Arm IP . . . and with that we are looking now at the viability of moving beyond the current platform,” Haas told analysts on a call on Wednesday.

Shares in Arm fell about 8 per cent in after-hours trading on Wednesday as it gave a lacklustre revenue forecast for the third quarter, with a midrange of $1.06bn compared with the $1.07bn expected.

It said it expected earnings per share of between $0.29 and $0.37, with a mid-range lower than the $0.35 anticipated.

Revenue for the quarter to the end of June was $1.05bn, up 12 per cent year on year but still slightly below the $1.06bn analysts were anticipating. 

Of that, royalty revenue — the cut paid to Arm by customers on the chips they sell — was $585mn, up 25 per cent year on year, while licensing revenue was $468mn, down 1 per cent.