Message from Arm CEO—SoftBank Group Report 2024

Arm is a global leader in the development of semiconductor technology, and we are defining the future of computing. A future that is being built by one of the most successful technology ecosystems in the world combining Arm, the leading CPU designer, and over 1,000 companies that partner with Arm to create billions of digital electronics products.

We fueled the smartphone revolution, and now we are redefining what is possible in cloud computing, transforming the automotive industry, enabling a thriving IoT economy, and making artificial intelligence (AI) a reality everywhere from data centers to edge computing. Through our focus on energy efficiency and our history of continuous innovation, we have enabled new categories of “smart” consumer electronics. Today, power efficiency is not only important for enterprises and consumers reducing their energy bills but also critical in achieving sustainability for our planet. This makes Arm’s CPU technology ideal for computing applications everywhere as the demands for increasing performance are insatiable, especially as more applications adopt AI, while the need for energy efficiency remains critical.

Arm licenses CPU designs to leading technology companies that incorporate Arm’s design into their computer chips. Customers pay a license fee to gain access to our technology and a royalty on every chip that uses one of our technology designs.

The value of the license fee typically depends on the amount of Arm technology being licensed, how advanced the technology is, and the period over which access is being granted. In recent years, Arm introduced Arm Total Access, a subscription-like business model where customers get access to a large proportion of Arm’s technology portfolio. Most Arm Total Access agreements are signed for three years, and then renewed, providing for Arm license revenue for many years to come.

The value of the royalty fee can be related to the selling price of the chip and will typically increase as more Arm processors are included on the chip and as Arm’s most advanced processors are included. As an example, Arm’s latest CPU technology, Armv9, is gradually replacing the previous generation Armv8^*, especially in smartphones and data center servers. For fiscal 2023, the typical royalty fee for Armv9 was around double the fee for Armv8.

Each Arm technology design is suitable for a range of end applications and can be reused in a variety of products to address multiple markets. Each new product generates a new stream of royalties. An Arm design can be used in many different chips, and certain Arm-designed products continue to generate royalty revenue 25 years after their initial development.

In our fast-paced world, new applications, device categories, and markets are continually emerging, many of which require advanced semiconductor chips to provide their capabilities. In contrast, it can take many years to develop the technology that is used in these new devices. Arm is investing currently for products that it expects consumers and enterprises will start using in 5 –10 years.

Arm has been investing to develop new technology to

For me, the highlight of the year was the Arm IPO on September 14, 2023, when we listed on the Nasdaq Global Select Market. This was a historic event for the company and its employees, one that we celebrated across all our offices around the globe. Arm has been developing leading technology for over 30 years, but so much has changed in just the past few years since SBG acquired Arm in 2016.

SBG will continue to play a major role in Arm’s future. Masa (Masayoshi Son, Representative Director, Corporate Officer, Chairman & CEO of SBG) maintains his position as Arm’s Chair and continues to provide leadership to Arm’s strategy. Also, SBG currently holds a large proportion of Arm shares and so will directly benefit from any appreciation in Arm’s valuation.

Together, we will benefit from the growth of the semiconductor industry, the increasing deployment of AI capability in chips from cloud to edge computers, and the higher value per chip from the latest Arm technology. These are trends that enable Arm to grow for years, if not decades to come.