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  • Writer's pictureConnie Chan

Arm Making Chip Prototypes – Will It Start Competing With Its Own Chip Manufacturing Customers?

Chip designer Arm dubbed the “Switzerland” of the semiconductor industry, is set to create its model chip.

The British company says it is making a prototype to showcase its chip-making capabilities and is not aiming to compete directly with its customers.

Industry Player Has Come to Play Big

The British semiconductor company owned by SoftBank is reportedly working on its chip design in a bid to showcase its architectural capabilities, according to a Financial Times report.

The effort is Arm’s most advanced chip-making effort to date, and it is expected to attract new customers while fueling the company’s growth and stability.

Following a planned Nasdaq listing later this year, the team insisted on moving to start producing chips rather than sticking to its traditional role of producing blueprint designs for chip makers.

Arm intends to demonstrate its superior chip design capabilities to the broader market.

However, rumors about Arm’s chip-making moves have fueled fears in the semiconductor industry that if it produces a good enough chip, it may seek to sell it in the future, becoming a direct competitor to some of its biggest customers, such as MediaTek or Qualcomm.

Arm, on the other hand, says there are no plans to sell or license the product and that it only works on a prototype.

The company’s push to increase profits and, more importantly, attract investors ahead of its planned initial public offering (IPO) has led it to look for new growth opportunities.

Arm, the Switzerland of Semiconductors

Arm’s traditional business model involves the development of cutting-edge blueprint chip designs that can be used in various products ranging from smartphones to servers.

The company has remained neutral by developing and manufacturing prototype designs for almost all mobile device chipmakers while not directly competing with them.

The new chip will be developed in collaboration with manufacturing partners and will be the most advanced chip-making effort the company has ever embarked on.

While Arm has previously built test chips with partners such as Samsung and Taiwan Semiconductor Manufacturing Co, the newest chip is “more advanced than ever.”

To ensure the smooth execution of this project, Arm has also formed a larger team and is targeting a diverse set of manufacturers rather than software developers.

The company’s new “solutions engineering” team, led by chip industry veteran Kevork Kechichian, will develop prototype chips for mobile devices, laptops, and other electronic devices.

The team would actively work to improve the performance and security of the designs, as well as a drive developer access to its product.

Chip development is a capital-intensive process, and Arm must show significant returns to justify the investment.

The company has recognized the risk of concentrating its customer base because its top 20 customers account for 86% of its revenues.

A loss of key customers would significantly impact the group’s growth, thus the need for diversification.

The semiconductor industry has faced a series of mid-jumps and roadblocks, with the Covid-19 pandemic increasing demand for electronics ranging from laptops to smartphones and the automotive industry competing for chips, particularly for electric vehicles (EVs).

Of course, such a significant disruption would result in a chip shortage.

The expansion of Arms into chip-making reflects the growing importance of the semiconductor industry.

This industry plays a major stake in developing technologies such as 5G and artificial intelligence.

Arm to produce best-in-class models

As more companies continue to look into developing new products and services, the semiconductor industry will continually play various critical roles in the drive for innovation and growth.

According to Brad Wang, a semiconductor analyst with Counterpoint Research, Arm believes it can produce the best-in-class Arm-based chips.

Despite admitting that making chips is more difficult than building devices, Wang stated that it would require generation after generation of development efforts.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.


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