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Arm Holdings (NASDAQ:ARM) has reportedly struggled to get Apple (NASDAQ:AAPL) to pay more for its intellectual property, leaving possibly billions of dollars on the table.
Apple (AAPL) pays less than 30 cents per device for the right to use Arm-based (ARM) chips in its iPhones, iPads, Macs and Apple Watches it sells each year, the lowest royalty rate among Arm’s (ARM) smartphone chip customers, The Information reported, citing people familiar.
As a result, Cupertino, Calif.-based Apple (AAPL) comprises less than 5% of Arm’s (ARM) sales, around half of what Arm’s top two customers, Qualcomm (QCOM) and Mediatek, generate, the news outlet added.
After SoftBank (OTCPK:SFTBY) purchased Arm in 2016 for $32B, the Japanese tech conglomerate tried to change Arm’s royalty rates to no avail.
SoftBank CEO Masayoshi Son spoke with Apple CEO Tim Cook at one point and told him that Arm was raising prices on all smartphone and customers, to which Cook said the existing contract between the two companies ran through 2028, the news outlet added.
Arm (ARM) returned to the public markets in September at a valuation of $68B.
Apple (AAPL) has explored the possibility of using a competing technology, known as RISC-V. However, in its September IPO filing, Arm (ARM) said it signed a new licensing agreement with the tech giant that “extends beyond 2040.”