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2026-02-12 Arm wants a bigger slice of the chip business
IN THE SEMICONDUCTOR industry, Arm is everywhere and nowhere. Designs from the British-based, American-listed, Japanese-controlled firm sit in almost all the world’s smartphones and most other connected devices. Yet Arm does not sell a single chip. Customers license its designs, tweak them if they wish and produce the chips themselves (or have them made). Arm pockets an upfront licence fee and a slim per-chip royalty. The model has made it ubiquitous. More than 300bn chips built on its designs have been shipped—over 30bn of them last year alone.
Weak demand for smartphones and consumer electronics has weighed on Arm’s shares: since the start of 2025 their price has declined by 2%, even as the benchmark Philadelphia semiconductor index, fuelled by enthusiasm for artificial intelligence, has climbed by 65% (see chart).
Designing a new CPU can cost hundreds of millions of dollars and take 12-18 months. An off-the-shelf blueprint spares customers, such as Apple, much of that burden.
Mr Haas argues that this is only the beginning. As AI workloads shift from training to inference, where models respond to user queries, demand for efficient, general-purpose processors should rise. Much of that work, Arm’s boss expects, will spread beyond data centres into phones, wearables and cars, again favouring CPUs.
Analysts expect revenue this fiscal year to be around $5bn, with half from royalties and the rest from licensing fees.
According to Visible Alpha, a data provider, last year Arm earned royalties of $0.86 per mobile chip, or 2.5-5% of the price.
To illustrate, Mr Haas uses an analogy. For most of its history, Arm sold designs for individual processors. Think of them as “Lego bricks”. Recently it has also started selling blueprints for pre-assembled blocks of processors known as “subsystems”.
One option is to develop custom chips for cloud providers. That has proved lucrative for Broadcom: making bespoke chips for Google and Amazon has helped push its market value above $1.6trn (Arm is worth $135bn). Some analysts think Arm will go further and design and sell its own chips. Rumours suggest that Meta, a social-media giant, will be the first customer.
Either route would bring Arm a bigger cut from its designs, but would entail risks. Creating finished chips, or moving in that direction, would undermine the claim that it does not compete with its customers.
SoftBank, the Japanese conglomerate that owns over 85% of the firm, has been assembling its own chip portfolio, buying Ampere, which makes server processors, and Graphcore, which designs AI chips. In August it bought 2% of Intel for $2bn. Masayoshi Son, SoftBank’s boss, is said to be keen to build an AI champion to rival Nvidia. Mr Haas, who sits on SoftBank’s board, talks up synergies across the group’s chip businesses. But all this may push Arm away from being a neutral supplier of designs.
The big test is whether the revenues of those pouring money into AI rise fast enough to justify the spending. At some point, “the math does need to square”.
A separate concern lies in China, source of a fifth of Arm’s revenue. China’s government is promoting RISC-V, an open-source chip architecture pitched as a domestic alternative to designs from Arm and Intel.
Mr Haas says his biggest worry is whether Arm is investing fast enough to take advantage of the AI opportunity. Chips take years to design and build; AI models evolve in months. Whether the company can move quickly enough is one question. Whether it can make the most of AI without undermining the model that put its designs everywhere is another.
2026-01-08 The AI frenzy is creating a big problem for consumer electronics
Excitement over the prospect of clever new devices powered by artificial intelligence is as strong as ever. Yet by gobbling up memory chips, which are essential for everything from smartphones and personal computers (PCs) to gaming consoles and cars, AI is creating a supply crunch for electronics-makers.
Jeffrey Clarke, chief operating officer of Dell, a manufacturer of computers, has called the situation “the most unprecedented mismatch in demand and supply” he has ever seen. Xiaomi, a Chinese smartphone-maker, has warned of delays and rising prices. Analysts predict that prices for PCs could jump by 15-20% in response. IDC, a data firm, reckons that if the situation persists, global smartphone shipments could fall by as much as 5% this year, and PC sales by roughly twice that.
Semiconductors are a cyclical business, prone to swing from surplus to shortage.
The rapid construction of data-centres has sent demand for HBM soaring. Producing it is resource-intensive: HBM requires three to four times as many silicon wafers as standard DRAM.
Supply is highly concentrated. Just three firms—SK Hynix and Samsung Electronics of South Korea, and Micron of America—rake in more than 90% of global DRAM revenue. All three are switching capacity to HBM, which will account for half of global DRAM revenue by the end of the decade, up from 8% in 2023, reckons Bloomberg Intelligence, a research group. HBM typically yields operating margins of 50% or more, compared with 35% for standard memory. Investors have rewarded the strategy. Since the start of 2025 the trio’s share prices have risen by an average of 200% (see chart 1).
But the flip side is that more basic memory chips, which account for 15-40% of the cost of smartphones and PCs, are becoming scarcer and costlier. The price for the DRAM found in most consumer electronics, known as DDR4, has risen by 1,360% since April 2025 (see chart 2).
The impact will be uneven. Apple, with its pricey i-gadgets and enormous scale, will be better placed to absorb higher costs and secure supply. Samsung will benefit from in-house memory production.
Asus, a Taiwanese PC-maker, raised prices for its laptops on January 5th. Xiaomi has said memory costs will have a “big impact” on margins. Carmakers may feel the strain most: as vehicles incorporate more electronics, the amount of DRAM per car is growing rapidly.
Relief will come slowly. Memory-makers plan to spend about $61bn on capital investment for DRAM this year, a 14% increase on 2025. But new capacity takes as long as two years to come online. Moreover, 60-70% of planned investment is earmarked for HBM, reckons Jukan Choi of Citrini Research, a firm of analysts. Chinese producers, which have become big suppliers of basic DRAM in recent years, are unlikely to plug the gap; they too are focusing on HBM. For now, only an unravelling of the AI boom would ease the shortage. Consumers may soon feel the pain.
2026-01-06 America’s missing manufacturing renaissance
Nearly a year on, however, the Trumpian manufacturing renaissance is conspicuous by its absence. The manufacturing contraction is now entering its third year, and factories have continued to shed jobs; employment fell by 0.6% in the year to November (see chart 1). And it is not just that Mr Trump’s actions are failing to revive American manufacturing. Under the hood, there are signs that they are actively hurting it.
Part of the problem is high interest rates. American industry fell into recession in early 2023, soon after the Federal Reserve sharply raised rates to combat inflation. Manufacturing, with expensive and often debt-financed kit, is especially sensitive to such changes. Mr Trump is keen to see looser monetary policy; America’s continuing high rates mostly reflect robust economic growth and vast rate-insensitive AI spending. All the same, his policies have not helped. High deficits and threats to the independence of the Fed have made American debt less desirable for investors, and thus lifted borrowing costs.
Moreover, his tariffs have injected uncertainty into the economy. For a manufacturing sector that sends nearly a quarter of its output abroad, this is a significant problem. Many inputs also come from abroad—think of industrial chemicals used in adhesive, coatings and plastics for cars or active pharmaceutical ingredients for medicines. Indeed, surveys suggest that export orders and import volumes for manufacturing have contracted markedly since Mr Trump announced high tariffs on “Liberation Day” in April, one that goes beyond the wider weakness in manufacturing (see chart 2). Factory bosses report difficulty making long-term plans.
Another way to see these costs is to look at the one sort of manufacturing that has been on a tear: computer equipment, especially semiconductors (see chart 3). Demand for chips has leapt owing to the data-centre boom. Notably, however, computer parts have also received exemptions from Mr Trump’s tariffs, points out Joseph Politano of Apricitas Economics, a newsletter. Semiconductors have been carved out from Mr Trump’s “reciprocal” tariffs on specific countries. More recently, the president has also watered down the export-control regime designed to deny China chips used to train the most sophisticated AI models. This rare free-trade turn seems to have provided a spur to the industry.
