Apple pays Arm less than 30 cents per chip in royalties, new report says

Apple is known for being a tough business partner with its vendors, and a new report suggesting the company has negotiated a surprisingly small royalty rate with Arm, whose tech Apple uses to make the processors in its many devices, confirms that.

According to a report from The Information, Apple is paying Arm “less than 30 cents per device” to use Arm-based chips in laptops, phones, tablets, watchers, smart speakers and other devices. This is reportedly the smallest royalty fee structure among the companies that use Arm’s smartphone chip designs, adding up to less than 5% of Arm’s sales. In comparison, that’s about half of what Qualcomm and Mediatek — which the report says are Arm’s two biggest customers — pay.

The article paints Arm (and parent company, SoftBank) as — unsurprisingly — annoyed by the arrangement. The Information reports that when SoftBank purchased Arm in 2016, CEO Masayoshi Son looked to restructure the deal and raise rates, but failed to do so.

Arm licenses chip designs to companies like Apple to design chips. Other companies may use Arm’s chip designs wholesale, however. Arm originally started as a joint venture between multiple tech companies — of which Apple was a founding member.

Apple and Arm appear to have no plans to separate. In September, Arm announced that it and Apple had entered a long-term agreement “that extends beyond 2040[.]” That’s a long period in tech, and — according to The Information’s sources — far beyond the usual five-year term. But Apple has also reportedly looked into the open-source RISC-V architecture (which wouldn’t require any royalty payments at all) — potentially to give it leverage with Arm. We’ve seen Apple post jobs for RISC-V programmers before.

Apple uses Arm cores in chips across a variety of devices. Beyond the M-series system-on-chips in Macs (and some iPads) and A-series chips in iPhones (and other iPads), there are the system-in-packages in the Apple Watch (such as the S9 in the Apple Watch Ultra 2 and Series 9) and HomePod.

Working with Apple provides Arm and other vendors with a big boost in credibility. But the company is also known for cost-reducing strategies that often force vendors to lower prices, or — sometimes — lose money. It seems that Apple has also brought Arm more customers, which The Information claims looked to emulate Apple’s success — making for a complicated partnership that may span decades more.