Arm Holdings Stock Soars 13.23% Amid Licensing Fee Hike and New Chip Production Plans

Arm Holdings (ARM) has recently seen a notable rise in its stock, climbing 3.98% on January 21, marking a five-day streak with a cumulative increase of 13.23%. This surge pushed the stock to its highest intraday value since October 2024.

The company, renowned for its ARM architecture, which is used in 99% of smartphone CPU cores globally, continues to play a crucial role in devices powered by batteries such as wearables, tablets, and sensors. Arm licenses its architecture in various ways, allowing firms like Apple and Qualcomm to modify and customize chip designs to meet specific requirements. This range of licenses provides flexibility for clients, who pay royalties for each chip sold.

Recently, Arm has decided to significantly increase its licensing fees, reportedly by up to 300%. The reason behind this hike is the substantial profits made by companies utilizing Arm's licenses for CPU and GPU production, while Arm's own earnings haven’t matched those gains. For instance, Arm's revenue for the 2024 fiscal year stood at $3.23 billion, significantly lower compared to hardware revenues from its clients, such as Apple and Qualcomm.

While the exact impact of increased licensing fees on major clients like Apple remains uncertain, it's predicted to pose challenges for other companies like MediaTek and Samsung. MediaTek has already been dealing with competitive pressures, and an increase in costs could complicate its strategic positioning. Samsung, which has historically struggled with its in-house processor designs, may face additional hurdles as it shifts back to using standard architectures.

Interestingly, in addition to raising fees, Arm is contemplating the ambitious move of producing its own chips to sell directly to smartphone manufacturers. This strategy could heavily impact existing chip producers, particularly MediaTek, as it would introduce Arm as a direct competitor in the chip market.