HomeTechnologyWhy a British company could raise the price of our smartphones

Why a British company could raise the price of our smartphones

The British company ARM wants to invoice the design of its microprocessors directly to the manufacturers of electronic devices instead of to the chip manufacturers, as has been the practice until now.

You find them in almost all the electronic devices of your day to day, smartphones included. British designer ARM’s plans and tools now allow electronic chip providers such as Apple, Qualcomm or Nvidia to manufacture microprocessors that will then be used by manufacturers around the world.

But to boost its profitability, ARM, a Cambridge-based company owned by Japanese conglomerate Softbank, no longer wants to charge chip makers a commission (up to now around 1-2% per chip sold) to which it gave up now. their licenses directly. The company now wants to claim its share from manufacturers of electronic devices and phones based on the average sales price of those devices.

Explosion of margins… and prices

A small revolution that could raise the price of smartphones, since the amounts requested by ARM will be of a completely different order. HE financial times estimates that the average price of a Qualcomm chip of $40 (and $17 and $6 respectively for its competitors MediaTek and Unisoc) has so far allowed ARM to generate an average of 40 cents per phone sold.

But while the average cost of a smartphone was around $335 in 2022, the amounts requested skyrocket, even assuming a minimum commission of around 0.5% of the total value of a terminal, as suggested by 01net.com.

The British giant also plans to force chipmakers to only sell to manufacturers that have signed a contract with ARM, to secure these royalties. Under these conditions, the increase in costs could logically be reflected in the price of smartphones for the general public.

replenish the coffers

If ARM wants to increase its margins tenfold at all costs, it is mainly because its financial situation is not good. Last year, the acquisition of its mega-project was stopped in mid-flight, after investigations by several competition authorities raised concerns about the central position in the global semiconductor industry that this acquisition could offer to potential buyer, Nvidia. Add to this that the group’s profitability is not looking good, while its internal costs are increasing.

ARM thus hopes to restore its accounts and become essential in the market to boost its valuation, estimated today between 30,000 and 70,000 million dollars. The rumor of a change in the economic model had been dormant since October 2022, according to the specialized site Semi Analysis, but now ARM is accelerating the movement in view of its IPO.

In a failing semiconductor market, the upheaval of ARM’s proposed model could benefit its competitor RISC V, which offers an open architecture that its customers are free to modify, even if it means later reselling its own chips to others.

Author: lucia lequier
Source: BFM TV

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