Chip designer Arm builds its own advanced prototype semiconductor

Arm is developing its own chip to showcase the capabilities of its designs, as the SoftBank-owned group seeks to attract new customers and fuel growth after a successful IPO later this year.

The company will team up with manufacturing partners to develop the new chip, according to people briefed on the move who describe it as the most advanced chipmaking effort ever undertaken by the Cambridge-based group.

The effort comes just as SoftBank is looking to boost Arm’s earnings and attract investors to a planned listing on the Nasdaq New York stock exchange.

The company traditionally sells its blueprint designs to chipmakers, rather than getting directly involved in semiconductor development and production itself. The hope is that the prototype will allow him to demonstrate the power and capabilities of his designs to the wider market.

Arm has previously built test chips with partners such as Samsung and Taiwan Semiconductor Manufacturing Co, primarily to help software developers learn about new products.

However, several industry executives have told the FT that its new chip – which it has been working on for the past six months – is “more advanced” than ever. Arm has also formed a larger team that will execute the effort and targets the product at chipmakers more than software developers, they said.

The company has established a new “solutions engineering” team that will lead the development of these prototype chips for mobile devices, laptops and other electronics, according to insiders on the go.

The solutions engineering arm is led by chip industry veteran Kevork Kechichian, who joined Arm’s management team in February. He held previous positions at chipmakers NXP Semiconductors and Qualcomm, overseeing the development of the San Diego-based company’s flagship Snapdragon chip.

The team will also expand on Arm’s existing efforts to improve design performance and security, as well as strengthen developer access to its products.

Rumors about Arm’s chip-making initiatives have fueled fears in the semiconductor industry that if it makes a good enough chip, it might seek to sell it in the future and thus become a competitor to some. of its biggest customers, such as MediaTek or Qualcomm.

Those close to Arm insist there are no plans to sell or license the product and that he is only working on a prototype. Arm declined to comment.

Any move to build chips for wider commercial sale would undermine Arm’s position as the “Switzerland” of the semiconductor industry, selling designs to nearly every mobile device chipmaker without competing with them. directly.

Its neutral model has seen its products end up in more than 95% of smartphones, with customers including Qualcomm, MediaTek and Apple.

“Working on IP is one thing, but designing and working with production partners to turn those efforts into physical chips is a whole different arena. It’s more capital intensive,” a former Arm executive with knowledge of effort.” At some point in the future (Arm) will definitely need returns to justify this massive investment.”

SoftBank’s growth spurt led Arm to seek changes in its business practices. The chip designer has sought to raise prices and overhaul its business model by charging royalties to device makers rather than some of its chipmaker customers, the FT reported last month.

Arm acknowledged in its annual report released last week that one of the main risks to its business was the “significant concentration” of its customer base. Arm’s top 20 customers accounted for 86% of revenue last year, so “the loss of a small number of key customers could have a significant impact on the group’s growth.”

That warning came with Arm currently embroiled in a bitter legal dispute with Qualcomm, one of its biggest customers, after accusing the chipmaker of using some of its designs without obtaining the necessary license.

There are also widespread concerns in the industry that internal chips developed by Apple, Arm’s biggest customer, outperform those made by rivals such as Qualcomm and MediaTek.

“Google thought it could demonstrate the best Android operating system in the world, so it built the Pixel phone. Microsoft thought it was the master of Windows, so it built Surface laptops. So naturally , Arm thinks it can build the best Arm-based chips, better than chip developers,” said Brady Wang, semiconductor analyst at Counterpoint Research.

But making chips is even harder than building devices, Wang said. “It will take generation after generation of development efforts.”

Additional reporting by Christian Davies in Seoul

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