The British chip designer’s modest size belies its central role in the digital revolution
, governments, trustbusters, investors: all eyes are on the much-anticipated stockmarket listing of Arm. Despite the recent rout in tech stocks, SoftBank, the Japanese group that paid $32bn for the British chip designer in 2016, still plans to refloat its shares by next March.
Start with the ubiquity. Unlike firms such as Intel, which sells chips that it both designs and manufactures, Arm trades only in intellectual property . For a fee, anyone can license one of its off-the-shelf designs, tweak it if necessary, and sell the resulting chip. Besides licensing revenue, Arm takes a small royalty from every sale of a chip built with its technology. In 2021 licensing revenues accounted for a bit over $1bn, while royalties brought in $1.5bn.
That same roster of customers is also part of the explanation for the mismatch between Arm’s importance and its finances. Low prices were one reason why Arm’s technology triumphed over rival chip architectures. New Street reckons that Arm earns royalties of just $1.50 from the sale of a high-end smartphone, for which consumers fork out $1,000 or more. Cheaper gadgets might earn it a few cents.
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