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Arm recently announced its financial report for the first quarter ending June 30, 2025, which showed that ARM’s revenue and profit slightly fell short of Wall Street expectations. However, the most noteworthy aspect is that Arm plans to invest part of its profits into self-developed chips and other hardware components, moving from a traditional IP licensing model into chip design and even manufacturing.
Arm’s business primarily operates on an IP licensing model, serving as an upstream supply chain for specific chip design manufacturers, providing core IP design blueprints to major tech companies such as NVIDIA, Google, Qualcomm, MediaTek, Apple, Huawei, and Xiaomi.
In an interview with Reuters, Arm CEO Rene Haas revealed that to further expand high-profit businesses, ARM will “go beyond design” itself. He stated, “We are intentionally increasing our investment, not just limited to design, but to manufacturing chiplets, and even more complete solutions, a physical chip, a circuit board, a complete system.”
Additionally, Haas mentioned that finished chips are the “physical embodiment” of Arm’s products called Compute Sub Systems (CSS) that have already been sold.
However, Haas did not provide a specific timeline or product details, only stating that they would consider everything from chiplets to complete boards and even entire machines. This move faces high costs and significant risks, as industry insiders claim that the manufacturing cost of advanced chips alone exceeds $500 million, while the costs for supporting server hardware and accompanying software may be even higher.
Arm also acknowledged that if it chooses to fully manufacture chips, it will erode profits in the short term and cannot guarantee that development projects will reach mass production. Furthermore, Haas did not provide a timeline for investment returns or new product launches during the earnings call.
Investors reacted strongly to Arm’s strategic adjustment, with ARM’s stock price plummeting nearly 13% in early trading on July 31. As of 2:00 PM Eastern Time, the stock price was reported at $142.75, down 12.6%; and in after-hours trading the previous day, there had already been an 8% decline.
J.P. Morgan analyst Harlan Sur stated that although the ARM team remains focused on system-level software and artificial intelligence plans, this new chip strategy puts ARM in competition with its own customers and may lead to conflicts of interest.
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