The new business strategy by ARM could increase the prices of Android smartphones

ARM Holdings is a UK-based firm. It is well-known for its semiconductor chip designs. Almost 95% of smartphones utilize chips designed by ARM. It now appears that the company is going to restructure its business strategy. According to a report from Financial Times, the company is preparing for the IPO (Initial Public Offering) 2023 in New York. Just before the event, the news regarding the change in business strategy has come forward. Industry sources and former employees at the SoftBank-owned company attest to the fact that the company has already informed a number of significant clients of the impending change to its prior organizational structure.

Reportedly, ARM is going to shift towards a device-value-based model. It will no longer charge chipmakers in accordance with the value of chips. Such a measure is likely to increase the revenue generated with the sale of each design. Since the monetary price of an average smartphone is quite high in contrast to a single chip. According to a former senior employee who spoke to Financial Times, Arm is approaching clients and saying, “We would want to get paid more money for basically the same thing.”

Major companies like MediaTek, Unisoc, Qualcomm, Xiaomi, and OPPO have been informed of the upcoming pricing changes. Additionally, it is believed that the corporation hopes to raise at least $8 billion through a highly successful US Stock Market debut that is planned for this year.

How this change will impact the companies?

Let us understand this by a simple example. The System LSI unit of Samsung develops the Exynos series of ARM-based SoC. They are then manufactured by Samsung Foundry. Samsung basically, utilizes Exynos and Snapdragon chips in its smartphones. both chips are based on ARM chip designs. If there is an increase in the cost of ARM chip design, then of course, Samsung would have to pay extra. Resultantly, the increase in cost will be passed on to consumers.

Well, this is what is known at the moment. It remains to be seen how smartphone manufacturing companies react to this change. Whether they will cover the additional expense on their own or pass it on to their consumers.