Arm is internally developing a prototype semiconductor, sources say

Rumor mill: Arm has traditionally licensed blueprints of its designs to other companies, which has spread its influence across the entire computing industry. Reports that it’s actively developing processors could mark an end of an era in which it has acted as the “Switzerland” of computer chips.

According to anonymous Financial Times sources, Arm is developing a prototype chip to demonstrate the potential of its designs. The new project could be one of owner SoftBank’s efforts to increase the company’s profits.

Last year’s regulatory pressure that crushed Nvidia’s $40 billion bid to buy the Cambridge company signified Arm’s outsized importance. A significant factor behind Arm’s status is that instead of directly competing with other chip companies, it sells its designs and cooperates with them.

The company’s designs form the heart of virtually every smartphone and are also gaining prevalence in PCs. Projections indicate the Arm’s CPUs will hold a quarter of the laptop market by 2027, and Dell released an affordable Arm-based Windows laptop last month.

Arm’s status as a neutral source for chip manufacturers may have taken an unprecedented step this month due to an agreement with its longtime rival, Intel. Beginning in the second half of 2024, Intel will make arm-based mobile SoCs on its 18A process, starting with mobile designs before moving to automotive, Internet of Things, data center, aerospace, and government.

Sources close to Arm say the latest internal project is just a demonstration prototype that the company doesn’t intend to sell or license and that it’s also the most advanced undertaking in Arm’s history. The company built a new team upon starting the development of the chip around six months ago, headed by NXP, Qualcomm veteran, and Snapdragon architect Kevork Kechichian. Arm’s decision to compete directly with its customers could disrupt the chip industry.

The new “solutions engineering” team also oversees fresh designs for laptops, mobile devices, and other areas. Furthermore, it facilitates developers’ access to Arm’s designs while improving their performance and security.

The company unveiled a proposal to increase profitability in March as its owner, SoftBank, faces financial headwinds. The plan would see Arm start charging royalties for its designs based on selling prices, pulling in more money from device manufacturers that use Snapdragon chips, like Samsung.