How a Lopsided Apple Deal Got Under Arm’s Skin
The SoftBank-controlled chip designer Arm has played an important role in helping Apple’s devices outflank the performance of rivals. But the iPhone maker pays unusually low fees to Arm because of its unique leverage in the smartphone industry.
In 2017, SoftBank CEO Masayoshi Son gathered a group of executives from Arm Holdings, the British chip designer SoftBank had just bought, to complain about one of its most important customers: Apple.
In a conference room in Tokyo, Son told the group that Apple paid more for the piece of plastic that protects the screens of new iPhones than it did to license Arm’s intellectual property, according to a person with direct knowledge of the meeting. To punctuate his point, Son pretended to peel the plastic wrap off an iPhone in front of the group.
Six years later, Arm still faces the same problem: Apple pays less than 30 cents per device for the right to use Arm-based chips in the hundreds of millions of iPhones, iPads, Macs and Apple Watches it sells each year, according to people with direct knowledge of the matter. That’s the lowest royalty rate among Arm’s smartphone chip customers, traditionally its biggest group of customers by revenue, the people said. As a result, Apple accounts for less than 5% of Arm’s sales, around half the figure for each of the chip company’s top two customers, Qualcomm and Mediatek, they said.