ARM CFO Says ‘Delivering Silicon Is Definitely More Complicated’ As Chip Designer Eyes Deals To Go From Licensing To Making Chips: Report

• Child said that Arm must secure fabrication and memory capacity as it moves into selling finished chips, while adding that selling chips comes with a different set of challenges.
• He added that since Arm is starting from scratch in chip manufacturing, it will need a couple of years to ramp up its share of fabrication and memory capacity.
• Child said the opportunity for Arm’s AI chips has grown significantly since the company began pursuing the business with the launch of the AGI CPU in March this year.

Arm Holdings plc (ARM) is looking to expand beyond its traditional chip-design licensing business as it takes on a bigger role in developing and selling finished chips, Chief Financial Officer Jason Child said on Monday.

During an interview with The Information, Child said that Arm is likely to stick to acquisitions such as the networking startup DreamBig, as it looks to expand its focus beyond licensing chip designs to making chips of its own.

“Delivering silicon is definitely more complicated,” Child said, when compared to just licensing chip designs.

Arm’s American Depositary Receipts were up nearly 2% in Monday morning’s trade.

ARM Leaves Door Open To Bigger Deals

While Child said Arm is likely to continue focusing on smaller acquisitions, he did not rule out larger transactions. “Large M&A is certainly [a] capability,” he said, adding that the company will evaluate potential deals.

“Certainly we will evaluate everything,” Child said. Arm has acquired about 20 companies over the past 20 years, with most deals involving smaller private companies.

Child said the company considers acquisitions based on whether they can expand its total addressable market or increase its ability to develop more capabilities internally.

Selling Chips Comes With New Challenges, Says Child

Arm’s move into selling finished chips also brings new financial and operational challenges compared with its traditional licensing model. Child said the company has to secure fabrication and memory capacity, with new entrants facing a particularly difficult environment as demand continues to exceed supply.

“When you’re trying to build chips, you have to kind of get in line,” Child said.

He added that since Arm is starting from scratch in chip manufacturing, it will need a couple of years to ramp up its share of fabrication and memory capacity.

Arm announced its entry into the AI chip segment with the introduction of the AGI CPU in March this year. The CPU is designed for AI data centers and is intended to address the demand for agentic AI workloads.

Child Says AI Chip Opportunity Is Bigger Than Expected

Child said the opportunity for Arm’s AI chips has grown significantly since the company began pursuing the business. “The opportunity has gotten much larger than what we’d even planned when we started it,” he said, while adding that the challenging part is that now the constraints are more visible.

Memory is among the biggest bottlenecks, Child said, while Taiwan Semiconductor Manufacturing Co. (TSM) has also discussed wafer and throughput capacity. He added that power availability is another constraint as companies build increasingly large AI data centers.

“The demand on compute is for the most part insatiable,” Child said. Arm’s CPUs are also used alongside Nvidia GPUs in servers for AI model training, while the company expects more than $2 billion in customer demand for its AI chips across fiscal 2027 and 2028.

How Retail Traders Reacted To ARM Stock

Retail sentiment on Stocktwits around ARM was in the ‘neutral’ territory at the time of writing.

ARM ADR is up 152% year-to-date and 101% over the past 12 months. The iShares Semiconductor ETF (SOXX) is up 127% over the past 12 months, while the VanEck Semiconductor ETF (SMH) is up 103%.

The Invesco QQQ Trust (QQQ) is up 27% during this period, while the Direxion Daily Semiconductor Bull 3X Shares (SOXL) is up 469%.

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