Chip architecture giant Arm’s possible fee hike threatens Samsung

Samsung Electronics' application processor Exynos / Courtesy of Samsung Electronics Why Samsung cannot abandon Exynos development By Nam Hyun-woo Samsung Electronics’ businesses for smartphone application processors (APs) are facing growing concerns as Arm, which holds over 90 percent of the market share in the global AP architecture market, is expected to hike the royalty rates for its clients by as much as 300 percent. Samsung Electronics has been reliant on Arm’s intellectual property (IP) for designing its in-house AP, the Exynos series. If the fee hike is realized, a rise in the manufacturing costs for the Exynos series is inevitable, dealing additional damage to the company’s already struggling foundry business.

Reuters on Jan. 14 reported that Arm is developing a long-term strategy to hike its royalty rates by as much as 300 percent, citing Arm’s strategy revealed during its unsuccessful court trial to secure higher royalties from Qualcomm’s APs. An AP is a chipset that works as the brain of a smartphone, combining functions of a central processing unit (CPU), graphics processing unit (GPU) and other core components like the modem, memory controller and power management unit.



In the trial, Arm claimed that Qualcomm should pay higher royalty rates for breaching the terms of its design subsidiary Nuvia’s license with Arm while producing new Snapdragon chips based on Nuvia’s Oryon technology. A smartphone with a displayed Qualcomm logo is placed on a computer motherboard in this photo illustration created March 6, 2023. Reuters-Yonhap Qualcomm claims that Oryon has “1 percent or less” of Arm's original technology, and a U.

S. federal court found that Qualcomm can use Nuvia’s technology in producing APs without paying additional royalty rates. This came as a temporary relief for Samsung which used Oryon-based Snapdragon 8 Elite for its latest Galaxy S25 smartphones, but at the same time increased the likelihood of Arm pursuing more aggressive profit strategies, such as the 300 percent fee hike, after losing the suit.

A fee hike could deal a hefty blow to Samsung’s in-house AP, the Exynos series, which uses Arm’s IP such as Arm v9 architecture. The latest Exynos 2500 has already been facing questions due to its manufacturing yield, which refers to the ratio of good and error-free units to the total number of units produced. The chip was set to be produced at the Samsung foundry’s 3-nanometer process and supposed to empower the Galaxy S25 series, but the company apparently failed to improve the process in time for the phone’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 To address the yield problem, Samsung even considered outsourcing Exynos 2500’s production to its foundry rival TSMC, but was rejected, according to a Jan.

15 report by tech media PhoneArena. “It is a really bad sign that Samsung is not using its own APs, even though its foundry business is suffering a loss,” said Lee Jong-hwan, a professor at Sangmyung University’s Department of System Semiconductor Engineering. “Not using its in-house chipset means that the company’s biggest strength as the total service provider is becoming its biggest weakness.

” Read More Galaxy S25 offers personalized AI assistant Why did Samsung overlook in-house memory for Galaxy S25? Samsung's mobile AP Exynos faces uncertain future Industry watchers expect that a 300 percent increase in fees to Arm could force Samsung to withstand greater costs for developing the Exynos series down the road, and the company may become less committed to maintaining its development. This is especially so when comparing the costs of paying the quadrupled fees to Arm versus the expenses of using Qualcomm's Snapdragon, which will eventually become independent of Arm’s licensing. Despite the challenges, Samsung seeks to improve the yield of Exynos 2500 in time to use it in the Galaxy Z Fold and Flip 7 series, which will debut in the latter half of this year Also, the company is reportedly developing Exynos 2600 for use as the AP for its upcoming smartphones.

Industry officials say the company is bound to be holding onto its in-house chipsets because of the cost advantages that Samsung has been enjoying as the world’s only total service provider which can design and fabricate chips and even produce end-devices such as smartphones. Attendees walk by Qualcomm's booth during CES 2025 at the Las Vegas Convention Center, Jan. 7.

UPI-Yonhap In the third quarter of 2023, when Samsung used only Qualcomm’s chipsets for its Galaxy S23 series, the cost of purchasing APs from outside parties accounted for 18.1 percent of its total spending for smartphone parts and materials. The ratio declined to 16.

6 percent in the third quarter of 2024, when Samsung used Exynos 2400 chipsets for the Galaxy S24 and S24 Plus. Qualcomm’s pricing strategy is also another reason for Samsung to continue making efforts on the Exynos series. Reportedly, Qualcomm has increased the price of Snapdragon 8 Elite between 20 to 30 percent, and U.

S. media reports assume that Snapdragon 8 Elite Gen 2 could see a significant price hike in 2025. For Samsung, which maintained the prices of Galaxy S25 phones despite the increased expenses for purchasing APs, Exynos’ success is critical for the profitability of its smartphone business as well.

“From Samsung’s perspective, the current situation could be a conundrum,” Lee said. “Samsung is assumed to be exploring ways to address the situation, such as developing its own design technology or securing more IP through partnership design houses, but we all know that this is a challenging and time-consuming process.”.