## Arm's Business Challenge: A Summary Arm, the dominant chip architecture designer, faces a critical juncture. While its designs power most smartphones and are gaining traction in servers, its business model is threatened. Key customers like Apple and Qualcomm increasingly design their own custom cores, opting for cheaper ISA (instruction set architecture) licenses instead of pricier core licenses – impacting Arm’s revenue. The core issue: Arm earns significantly less from ISA licenses. Raising these fees risks driving customers to RISC-V, a growing open-source alternative. However, directly competing with customers by manufacturing its own CPUs could further strain relationships. The debate centers on whether Arm can maintain its design superiority against competitors like Apple, and whether the threat of RISC-V is substantial enough to warrant risky pricing changes. Analysts suggest Arm could explore deeper integration into manufacturing, or position itself as a key player in emerging areas like AI, but its future hinges on adapting to a changing landscape where customers are becoming competitors and open-source alternatives are gaining momentum. The article highlights concerns about Arm’s financial structure and potential for value extraction rather than true value creation.