Analyst(s): Richard Gordon
Publication Date: February 28, 2025
Arm is the world’s largest provider of semiconductor intellectual property cores. If Arm confirms that it is launching its own, in-house designed chip, effectively competent with its customers, it should cause those customers to re-evaluate their business relationship with the company. In the short term, customers will have little option but to continue working with Arm but in the longer term, customers choosing a different technology partner could cause chaos in the semiconductor ecosystem.
Key Points:
- The Financial Times reported on 13 February, 2025 that Arm is planning to launch its own, in-house designed chip later in the year, perhaps as early as the summer.
- According to the FT, citing sources familiar with Arm’s plans, the company has already secured Meta as one of its first customers.
- Arm’s chip is expected to be a server CPU, customizable by customers and manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC).
Overview:
Arm Reported to be Launching Its Own Chip
Arm, the world’s largest provider of semiconductor intellectual property (IP) cores, is reportedly planning to enter chip production, with plans to launch its own in-house designed server CPU by mid-2025. This significant shift would see Arm transition from its role as an IP provider to a chip supplier, raising concerns and uncertainty within the semiconductor ecosystem.
Arm’s Success Built on Licensing IP
Since its founding in 1990, Arm has grown to become the world’s largest provider of semiconductor intellectual property cores with the number of Arm-based chips shipped annually growing to over 30 billion, as shown in Figure 1.
Figure 1. Arm-based Chips Shipped Annually
Arm has been immensely successful, primarily due to its RISC (Reduced Instruction Set Computing) architecture, which powers a variety of devices, including nearly all smartphones and increasingly data centers for AI workloads. The company’s business model of licensing its IP to other semiconductor firms has allowed it to grow without manufacturing chips itself. This model has made Arm a neutral partner within the ecosystem, fostering a broad network of over 1,000 companies that rely on its designs.
Shift in Strategy for Arm Could Cause EcoSystem Disruption
However, Arm’s decision to enter the semiconductor market directly by designing and selling its own chips represents a drastic shift in strategy. The company has already secured Meta as one of its first customers, signaling the potential demand for its chips, which will be customizable by customers and manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC).
This move could lead to significant disruptions. As Arm becomes a competitor to its customers, companies relying on Arm’s technology may face uncertainty about the future of their business relationships. Existing contracts may need to be reviewed, with some customers potentially seeking alternatives, such as RISC-V, an open-source processor IP that offers cost savings and customization potential. Additionally, larger companies might consider developing their own proprietary technology to avoid dependency on Arm.
SoftBank, which owns 90% of Arm, is reportedly driving this strategy as part of its broader ambition to capitalize on the booming AI infrastructure market. This is underscored by SoftBank’s reported acquisition of Ampere Computing, a company specializing in ARM-based server CPUs. While this could enable Arm to offer more tailored AI solutions, it risks alienating its established customers.
This move is also complicated by the failure of SoftBank’s attempted sale of Arm to NVIDIA in 2022, which raised concerns about competition and national security. If Arm enters the chip market, its customers may fear losing access to Arm’s latest technologies or becoming direct competitors, further destabilizing the ecosystem Arm has spent years cultivating.
In response to Arm’s potential shift, companies may need to reassess their reliance on Arm. Some could opt to renegotiate licensing agreements to secure non-compete clauses or guarantees of future access to Arm’s innovations. Others might turn to alternatives such as RISC-V or even invest in in-house technology development, though this would require significant resources.
Arm’s Move Reflective of Broader Semiconductor Market Trends
Arm’s new direction mirrors the ongoing transformation in the semiconductor industry, with a shift away from the traditional Integrated Device Manufacturer (IDM) model to the Fabless/Foundry model. Foundry service providers such as TSMC have allowed companies such as Arm to thrive by licensing their IP without needing to own manufacturing facilities.
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For more details: FT Article: Arm to launch its own chip in move that could upend semiconductor industry
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Author Information
Richard Gordon is Vice President & Practice Lead, Semiconductors for The Futurum Group. He has been involved in the semiconductor industry for more than 30 years, first in engineering and then in technology and market research, industry analysis, and business advisory.
For many years, Richard led Gartner's Semiconductor and Electronics practice, building a 20-person global team covering all aspects of semiconductor industry research, from manufacturing to chip markets and end applications. Having served on Gartner's Senior Research Board and as Gartner's Chief Forecaster, Richard has extensive experience in developing and implementing methodologies for market sizing, share and forecasting, to deliver data, analysis and insights about the competitive landscape, technology roadmaps, and market growth drivers.
Richard is a sought-after technology industry analyst, both as a trusted advisor to clients and also as an expert commentator speaking at industry events and appearing on live TV shows such as CNBC.
