Arm has altered its licensing model in a bid to attract more customers to its chip designs, improve its position in the Internet of Things market and stave off smaller rivals using RISC-V and other open source chip architectures. This week it introduced a program giving customers access to broad swathes of its IP for an annual fee and only charging licensing and royalty fees for IP used in production.
Arm has long subscribed to a pay-for-play business model. The way it works is that customers choose a desired chip design from Arm's library and gain access to it by paying upfront licensing fees, which can total millions of dollars depending on the CPU or IP. Once the chip enters production, Arm then starts charging a royalty rate—a small percentage of the total selling price of the chip—for every unit shipped into the market.
The new program, Arm Flexible Access, gives unlimited access to a large portion of its CPUs and other IPs, for a fraction of the standard upfront cost. Customer only pay licensing fees when the chip is taped out ahead of production, while royalty fees are reserved for when shipments of the chip start. So instead of shelling out fees to Arm long before the chip is actually developed, the initial costs can be spread out over a longer span.
Chip makers that partake in the new program are able to evaluate and "experiment more easily before committing to a particular technology path," said Dipti Vachani, general manager of the automotive and Internet of Things businesses at Arm. Customers get access to more than just Arm's CPUs and other IPs. They also gain access to its global support, training services and tools for chip design and software development.
The program is one of the biggest changes ever to Arm's business model. The move also underscores efforts by Arm, which sells IP to more than 500 customers globally, to repel startups rallying around RISC-V chips. Since RISC-V is open source, anyone can freely access the base architecture and add custom instructions on top of it. That potentially lowers the upfront costs involved with prototyping a new computer chip.
Arm is the biggest behind-the-scenes player in the semiconductor space. Roughly 23 billion chips based on Arm's architecture shipped last year, with its sales totaling more than $1.8 billion. Chips based on its blueprints are the backbone of billions of smartphones and have taken the early lead in the Internet of Things. Its customers range from Samsung and Apple to Qualcomm and Broadcom to NXP and Texas Instruments.
But times are changing, and Arm is trying to change with them. Many of the largest buyers of computer chips used in data centers, factories and cars are boosting production of their own chips to better compete in emerging areas such as artificial intelligence and IoT. They are trying to put themselves in better position to integrate hardware and software and deliver products that can be differentiated from those of rivals.
But many of these new market entrants are still learning the ropes. They prefer to evaluate different chip designs before deciding on what should go into production, Arm said. The Flexbile Access program aims to ease some of the financial stress facing system providers, OEMs and startups trying out chip design. That may end up expanding Arm's customer base and helping it pull in more licensing and royalty revenue.
With its new Flexible Access program, Arm is lowering the bar for gaining access to many of its most popular Cortex-A, Cortex-R and Cortex-M CPUs. The IP offered accounts for 75% of all Cortex CPU licenses since 2017. The new program also unlocks access to a broad range of GPUs, security, interconnects peripherals and essentially every other type of IP required to build a modern system on a chip (SoC).
“By converging unlimited design access with no up-front licensing commitment, we are empowering existing partners and new market players to address new growth opportunities,” Rene Haas, president of the intellectual property unit at Arm, said in a statement. The new program costs $75,000 a year for one tape-out annually or $200,000 for unlimited tape-outs. Licensing and royalty fees are based on the total IP used.
The Flexible Access program is positioned to counter the rapid rise of the RISC-V architecture, led in large part by Santa Clara, California-based startup SiFive. Even though anyone can use RISC-V to create chips, starting from scratch is still very costly and time-consuming. SiFive offers design services over the cloud that ease the development of custom RISC-V chips for everything from Internet of Things devices to data centers.
SiFive also makes money by licensing its own RISC-V CPUs, which are aimed at competing with Arm's Cortex CPUs. The startup's licensing model looks a little like Arm's Flexible Access program. Licensing and royalty rates are only attached to chips that enter final production. SiFive is also expanding its DesignShare program, which makes IP from the company's partners available to customers at little to no upfront cost.
SiFive has made more than 100 licenses available to customers using its RISC-V cores. Six of the top 10 players in the global chip market are among its customers. Last month, the Silicon Valley startup raised $65.4 million in funding from new investor Qualcomm and existing backers such as Chengwei Capital, Sutter Hill Ventures and Spark Capital. The funding doubled its total fundraising to $129.5 million since 2016.
Arm has been playing around with its licensing model as RISC-V has generated more buzz . Last year, the company curbed the licensing fees for using its Cortex-A5 CPU and added its Cortex-M1 and Cortex-M3 to its DesignStart program, which waives upfront licensing fees for CPUs on the low-end of its lineup. With DesignStart, Arm's partners are only on the hook for royalties if a chip starts shipping in high volumes.
Some of the company's more potent processor cores—including the high-performance Cortex-A CPUs and Mali GPUs that power flagship smartphones and designs dedicated to AI and data centers—are excluded from the new program. Arm said that Flexible Access will complement its standard licensing model, which it said is still the best option for partners seeking full access to its IP library.
