Chip architecture giant Arm’s possible fee hike threatens Samsung

Chip Architecture Giant Arm's Possible Fee Hike Threatens Samsung

Samsung Electronics' application processor Exynos / Courtesy of Samsung Electronics

Samsung Electronics‘ utility processor Exynos / Courtesy of Samsung Electronics

Why Samsung can not abandon Exynos improvement
By Nam Hyun-woo

Samsung Electronics’ companies for smartphone utility processors (APs) are dealing with rising issues as Arm, which holds over 90 % of the market share within the international AP structure market, is anticipated to hike the royalty charges for its shoppers by as a lot as 300 %.

Samsung Electronics has been reliant on Arm’s mental property (IP) for designing its in-house AP, the Exynos sequence. If the charge hike is realized, an increase within the manufacturing prices for the Exynos sequence is inevitable, dealing further harm to the corporate’s already struggling foundry enterprise.

Reuters on Jan. 14 reported that Arm is growing a long-term technique to hike its royalty charges by as a lot as 300 %, citing Arm’s technique revealed throughout its unsuccessful court docket trial to safe increased royalties from Qualcomm’s APs. An AP is a chipset that works because the mind of a smartphone, combining capabilities of a central processing unit (CPU), graphics processing unit (GPU) and different core elements just like the modem, reminiscence controller and energy administration unit.

Within the trial, Arm claimed that Qualcomm ought to pay increased royalty charges for breaching the phrases of its design subsidiary Nuvia’s license with Arm whereas producing new Snapdragon chips primarily based on Nuvia’s Oryon expertise.

A smartphone with a displayed Qualcomm logo is placed on a computer motherboard in this photo illustration created March 6, 2023. Reuters-Yonhap

A smartphone with a displayed Qualcomm brand is positioned on a pc motherboard on this picture illustration created March 6, 2023. Reuters-Yonhap

Qualcomm claims that Oryon has “1 % or much less” of Arm’s unique expertise, and a U.S. federal court docket discovered that Qualcomm can use Nuvia’s expertise in producing APs with out paying further royalty charges.

This got here as a brief reduction for Samsung which used Oryon-based Snapdragon 8 Elite for its newest Galaxy S25 smartphones, however on the similar time elevated the chance of Arm pursuing extra aggressive revenue methods, such because the 300 % charge hike, after dropping the go well with.

A charge hike may deal a hefty blow to Samsung’s in-house AP, the Exynos sequence, which makes use of Arm’s IP akin to Arm v9 structure.

The most recent Exynos 2500 has already been dealing with questions attributable to its manufacturing yield, which refers back to the ratio of excellent and error-free items to the full variety of items produced. The chip was set to be produced on the Samsung foundry’s 3-nanometer course of and imagined to empower the Galaxy S25 sequence, however the firm apparently failed to enhance the method in time for the cellphone’s launch.

The new Samsung Galaxy S25 smartphones, featuring advanced camera technology and artificial intelligence capabilities, are unveiled at a media preview event in San Jose, Calif., Tuesday. AP-Yonhap

The brand new Samsung Galaxy S25 smartphones, that includes superior digicam expertise and synthetic intelligence capabilities, are unveiled at a media preview occasion in San Jose, Calif., Tuesday. AP-Yonhap

To deal with the yield drawback, Samsung even thought of outsourcing Exynos 2500’s manufacturing to its foundry rival TSMC, however was rejected, in line with a Jan. 15 report by tech media PhoneArena.

“It’s a actually unhealthy signal that Samsung isn’t utilizing its personal APs, regardless that its foundry enterprise is struggling a loss,” mentioned Lee Jong-hwan, a professor at Sangmyung College’s Division of System Semiconductor Engineering. “Not utilizing its in-house chipset implies that the corporate’s greatest energy as the full service supplier is changing into its greatest weak point.”

Trade watchers count on {that a} 300 % enhance in charges to Arm may pressure Samsung to resist higher prices for growing the Exynos sequence down the highway, and the corporate could turn out to be much less dedicated to sustaining its improvement. That is particularly so when evaluating the prices of paying the quadrupled charges to Arm versus the bills of utilizing Qualcomm’s Snapdragon, which is able to ultimately turn out to be unbiased of Arm’s licensing.

Regardless of the challenges, Samsung seeks to enhance the yield of Exynos 2500 in time to make use of it within the Galaxy Z Fold and Flip 7 sequence, which is able to debut within the latter half of this 12 months Additionally, the corporate is reportedly growing Exynos 2600 to be used because the AP for its upcoming smartphones.

Trade officers say the corporate is certain to be holding onto its in-house chipsets due to the price benefits that Samsung has been having fun with because the world’s solely whole service supplier which might design and fabricate chips and even produce end-devices akin to smartphones.

Attendees walk by Qualcomm's booth during CES 2025 at the Las Vegas Convention Center, Jan. 7. UPI-Yonhap

Attendees stroll by Qualcomm’s sales space throughout CES 2025 on the Las Vegas Conference Middle, Jan. 7. UPI-Yonhap

Within the third quarter of 2023, when Samsung used solely Qualcomm’s chipsets for its Galaxy S23 sequence, the price of buying APs from outdoors events accounted for 18.1 % of its whole spending for smartphone components and supplies. The ratio declined to 16.6 % within the third quarter of 2024, when Samsung used Exynos 2400 chipsets for the Galaxy S24 and S24 Plus.

Qualcomm’s pricing technique can be another excuse for Samsung to proceed making efforts on the Exynos sequence. Reportedly, Qualcomm has elevated the value of Snapdragon 8 Elite between 20 to 30 %, and U.S. media experiences assume that Snapdragon 8 Elite Gen 2 may see a big worth hike in 2025.

For Samsung, which maintained the costs of Galaxy S25 telephones regardless of the elevated bills for buying APs, Exynos’ success is vital for the profitability of its smartphone enterprise as nicely.

“From Samsung’s perspective, the present scenario could possibly be a conundrum,” Lee mentioned. “Samsung is assumed to be exploring methods to handle the scenario, akin to growing its personal design expertise or securing extra IP by way of partnership design homes, however everyone knows that this can be a difficult and time-consuming course of.”

 

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