How Arm is gaining chip dominance with its architecture in Apple, Nvidia, AMD, Amazon, Qualcomm and more
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From smartphones to AI

Arm was founded in 1990 by 12 chip designers working out of a turkey barn in Cambridge. It was originally a joint venture between Apple, Acorn Computers, and VLSI, which is now part of NXP. Arm's big break came in 1993, when Apple launched its early handheld Newton device on the Arm610 processor. Haas said this gets at the "hallmarks" of the company. "We were born running a device off a battery that was going to be low cost," he said.

Arm's big break came in 1993 when Apple released its handheld Newton device on the Arm610 processor. Arm Holdings

That same year, Arm struck a deal with Texas Instruments, putting its processors in early Nokia mobile phones and beginning Arm's climb to become the dominant smartphone architecture it is today. Arm went public for the first time in 1998. Chief architect Richard Grisenthwaite was there. "We were about 100 people, and I've been very much involved in this tremendous transition that the company has gone through, expanding out from being targeting one particular market area into a wide range of different computing environments," Grisenthwaite said. Indeed, Arm grew rapidly in the 2000s, with the first touchscreen phones introduced in 2007 and the growth of connected home devices in the 2010s. Arm now has some 6,500 employees globally. Grisenthwaite said the majority of those employees are in the UK, and about a sixth are in the U.S., where Arm has offices in Arizona, California, North Carolina and Texas. It also has locations in Norway, Sweden, France and India. In 2016, Arm once again became a private company when Japan's SoftBank acquired it for $32 billion. Haas was president of the IP products group at the time, spearheading diversification into emerging markets, including AI. "PC and phone, automotive, data center and IoT. Those are the primary markets that we address. Every single one of those markets has AI embedded in some way, shape or form," he said. Arm has some 6,800 patents worldwide, with another 2,700 applications pending. Some of those are for Arm's Neoverse line for high-performance and cloud computing, which has helped it break into AI since its launch in 2018. In August, Nvidia announced its latest Grace Hopper Superchip, which couples its own GPUs with Arm's Neoverse cores. "By bringing those together and tightly coupling the way that Nvidia has with the Grace Hopper, they're able to come up with something that's something like 2 to 4 times the performance of what you'd get on an x86 system for a similar amount of power," Grisenthwaite explained.

Cash and competition

If you rewind just a couple years, Nvidia's interest in Arm went far beyond technology integration. Arm owner Softbank needed cash after losing money on high-profile investments in companies like WeWork and Uber . In 2020, SoftBank struck a deal with Nvidia to sell Arm for $40 billion. Eighteen months later, the deal fell apart, blocked by regulators and some of Arm's biggest customers, which also compete with Nvidia. Haas said he was, "Disappointed it didn't happen just because we spent so much time on it." Instead, Softbank announced plans to take Arm public again and Haas took over as CEO.

Arm CEO Rene Haas talks with CNBC's Katie Tarasov in San Jose, California, on October 12, 2023. Katie Brigham

Arm made its second public debut this September, climbing nearly 25% that day. The stock has fallen significantly since then. One risk comes from a free, open-source rival architecture called RISC-V. It's seen a recent surge in backing from some of Arm's big customers like Google, Samsung and Qualcomm, which may have been seeking alternatives when it looked like Nvidia was going to buy Arm. For now, RISC-V remains a low risk competitor according to Futurum Group CEO Daniel Newman. "RISC-V sits a few years behind where Arm is at, and I don't think we're going to hear a lot about it right away. I do think in low power, in IoT, in simpler designs, that RISC-V does have some traction," Newman said. Arm's bigger competition comes from x86. Developed by Intel in the 70s, x86 is the dominant architecture used for PC processors, with a massive amount of software developed for it. "The amount of software support is the thing that actually tends to determine the success or failure of that in the long run. Intel was very good early on with getting a ton of software support for x86," O'Donnell explained. Most servers have also traditionally been based on x86, but O'Donnell said that could shift. "What's happened in the server market is that the software has been componentized. It's broken up into containers and things like that, and that makes it easier to run on other architectures like Arm," he said. Amazon Web Services is a big player making Arm-based server chips. AWS launched its Graviton chips to rival x86 CPUs from AMD and Intel in 2018. "And really from there, Arm went from this mobile, low power IoT, automotive specialty embedded to holy cow, we can build next generation servers, PCs, and of course continue on this massive run of silicon for smartphones, all based on Arm," Newman said.

'If Apple can do it, can others?'

Apple is the big partner helping Arm break into the laptop market. Apple moved to its own Arm-based processors in Mac computers in 2020, breaking away from the Intel x86 processors that had powered them for 15 years. In October, Apple announced its latest line of M3 processors and the MacBooks and iMacs running on them. Apple said Arm-based M3 gives the newest MacBook up to 22 hours of battery life. "Nobody really believed, until Apple went all in and basically cut ties with x86 instruction sets and said, 'We are going to bet the future of the Mac on Arm.' And that was a huge inflection for the company. It was a change of the guard. And this isn't to say that Intel's future is in big trouble, but it certainly started to raise some question marks as to, well, if Apple can do it, can others?" Newman said. In September, Apple extended its deal with Arm through at least 2040. Qualcomm is another major customer making its latest PC processors using Arm, although that relationship is strained. Arm is suing Qualcomm over the right to make certain chips with its technology. The issues started after Qualcomm acquired CPU company Nuvia in 2021, and with it, Nuvia's Arm license. "Nuvia was actually supposed to be designing a server chip initially, so they had different terms with them. And so Qualcomm thought they could have the same terms. Arm felt no, different companies have different terms. And it's boiled down to essentially that: legal discussions around what those terms ought to be," O'Donnell explained. The case is set to go to trial in 2024. Arm is also growing in the automotive space. Although its chips have long been in cars, it's now a rapid growth area with the rise of self-driving capabilities and partnerships with companies like Cruise. Arm's Grisenthwaite calls self-driving "one of the most computationally intensive tasks we've ever seen on this planet."



"What we need to provide is a standard platform to allow the world's software developers to really concentrate on this incredibly hard task going forward," he said. This simplification is also making Arm the choice for non-chip companies like Apple, Amazon, Google and Microsoft designing their own custom silicon. "They've got a smaller team than entire companies built on that. And so you have to make that process easier and simpler. And that, for example, is where Arm is starting to move in terms of enabling the design of multiple components that connect together," O'Donnell said.

Arm Holdings headquarters in Cambridge, England, on October 3, 2023. Max Thurlow

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