Apple has gradually shifted to its custom silicon from Intel-based chips. The company is not limiting itself to developing processors but modems as well. However, it was recently reported that the company plans to forgo its attempts in the 5G modem business. A new report sheds light on Apple's deal with British chip architect Arm, stating that the Cupertino giant pays less than 30 cents per chip in royalties. Apple is possibly Arm's most prominent and promising customer, and how the two companies will move forward remains to be seen.

Apple holds 5 percent of Arm's annual revenue as it pays less than 30 cents per chip for all devices

Apple holds 5 percent of Arm's annual revenue, which is not much but does impact the whole market. Apple licenses the under-the-hood technology from Arm, which it uses in its iPhone, iPad, Mac, Apple TV, Apple Watch, and even the HomePod. However, according to a new report from The Information, Apple only pays less than 30 cents in royalties per chip, irrespective of the device. Moreover, the deal also does not consider the chip's core count.

However, Arm was unhappy about the deal, and it has continued offering Apple the same prices. Back in 2017, the owner of Arm, Softbank, reignited the agreement and wanted to negotiate the license fee from Apple. The company CEO stated that Apple pays more for the plastic that secures the panels on new iPhone models than its license fee. Softbank tried to negotiate the price of royalties, but it was unsuccessful.

Apple currently signed a new licensing agreement with Arm in September that stretches "beyond 2040." Arm continues negotiating an increase in the licensing fee, but it remains to be seen if Apple will reach a mutual conclusion. Note that Apple would want to extend its relationship with Arm for decades. On the side, the company is exploring open-source RISC-V technology. If the company succeeds in its attempts, it will potentially cut ties with Arm. However, these are mere speculations as Apple Silicon depends on Arm.

Apple revolutionized the industry with its M-series of chips in 2020, and the company has gradually shifted to its custom silicon entirely. Recently, the company announced its M3, M3 Pro, and M3 Max chips for the new 14-inch and 16-inch MacBook Pro models. Additionally, Apple is expected to launch the M3 iPad Pro models to boost sales. The more sales Apple makes, the more money would be paid to Arm for chip royalties.