UK-based chip designer Arm shifts to selling its own chips, landing Meta as its first major customer and challenging industry partners.

Figure 1. Arm Lands Meta as First Customer in Chip Push, Challenging Industry Giants.

In a groundbreaking move, Arm has secured Meta as the first major customer for its in-house designed server CPUs, signalling its entry into direct chip sales and positioning itself against industry giants like Qualcomm and Nvidia. Figure 1 shows Arm Lands Meta as First Customer in Chip Push, Challenging Industry Giants.

Traditionally known for licensing its chip designs to major players such as Apple, Nvidia, and Qualcomm, Arm is now stepping directly into the silicon market—potentially competing with the very customers it once supplied.

This strategic pivot represents one of the most significant shifts in Arm’s history, with the potential to disrupt long-standing partnerships and reshape the balance of power in the semiconductor industry, according to the Financial Times.

Meta Backs Arm’s First Server Chip, Challenging Intel and AMD

Arm’s debut internally designed semiconductor is set to be a server CPU targeting the data center market, with Meta as its first major customer. This moves positions Arm in direct competition with industry leaders Intel and AMD.

If successful, Arm’s entry into the data center CPU space could shake up the long-established x86-based server ecosystem, historically dominated by Intel.

Arm’s Server Chip Push Puts It in Direct Competition with Qualcomm, Intel, and AMD

Arm is now directly competing with one of its biggest customers, Qualcomm, for data center CPU deals. Qualcomm had been in talks with Meta to supply processors based on Arm’s architecture, but Arm has already secured part of the deal, marking a shift from its traditional role as a neutral IP supplier to an active market player, Reuters reported.

Arm’s first internally designed semiconductor is expected to be a server CPU targeting the data center market, with Meta as its first major customer, Financial Times noted. This moves challenges Intel and AMD, the dominant forces in server chip manufacturing. If successful, Arm’s entry into the data center CPU space could disrupt the long-standing x86-based server ecosystem led by Intel.

While discussions between Meta and Qualcomm are ongoing, Arm’s shift raises concerns among enterprise customers who may now find themselves competing with the very company they rely on for chip designs. A spokesperson for Arm declined to comment on the matter.

Hiring from Customers and Expanding Market Reach

Arm has been actively recruiting executives from its own licensees, signaling a deeper strategic transformation. According to Reuters, the company is expanding beyond designing processor architectures to selling its own silicon, with a strong focus on AI-powered data center chips and other high-performance applications.

This shift is more than just a hiring spree—it marks a fundamental change in Arm’s business model. Having long dominated the smartphone processor market, Arm is now setting its sights on high-performance computing (HPC) and AI-driven chips for data centers. While it will design its own semiconductors, the company will continue outsourcing production to foundries like TSMC, following a fabless model similar to Nvidia, Financial Times reported.

Industry Disruption and Competitive Tensions

Arm’s strategic pivot into direct chip sales is set to reshape the semiconductor landscape, challenging industry giants while raising concerns among long-time partners.

“Near-term mass migration away from Arm seems unlikely due to its established ecosystem and the complexity of shifting architectures,” said Rachita Rao, senior analyst at Everest Group. “However, companies like Qualcomm are already exploring alternatives such as RISC-V, and some firms have begun in-house efforts to reduce reliance on Arm. While some players might transition away, Arm remains the primary architect of these chips, with differentiation largely occurring at the SoC design level.”

SoftBank’s potential acquisition of Oracle-backed chip designer Ampere could further accelerate Arm’s efforts in this segment, Rao added. “The Meta deal lends credibility to Arm’s push into chip manufacturing, but while the company has financial and technical backing, it will take time to reach the level of established competitors. Even existing players are struggling to keep up with Nvidia.”

Arm’s new model mirrors Nvidia’s approach, where chip designs are developed in-house but manufacturing is outsourced to foundries like TSMC. This allows Arm to enter new markets while keeping capital expenditures low. However, the move could strain relationships with key partners like Apple, Qualcomm, and Nvidia, who must now reassess whether their reliance on Arm’s technology puts them in direct competition with it.

Regulatory scrutiny could also increase. “Arm already holds a near-monopoly in certain semiconductor IP segments, and regulators closely scrutinize its licensing policies and potential acquisitions,” Rao noted. “If Arm expands further into direct chip sales, regulators may require a clear separation between its IP licensing and chip manufacturing divisions. Any perceived preference for its own products or sudden licensing fee hikes could invite antitrust investigations.”

“As AI chip development accelerates, chipset makers will likely pursue both backward and forward integration,” said Faisal Kawoosa, founder and lead analyst at Techarc. “Arm’s move into chipmaking is a natural response to this trend, but it also introduces challenges. Competing with firms like Nvidia and Qualcomm requires more than just strong design expertise—it demands deep market knowledge, customer relationships, and extensive front-end integration, areas where its competitors currently have an edge.”

Potential Challenge to Nvidia in AI Chips

Beyond server CPUs, Arm is targeting the booming AI chip market, where Nvidia dominates. Arm is part of SoftBank’s Stargate initiative, a large-scale project developing AI-focused data centers in the U.S. in collaboration with OpenAI and Oracle.

If Arm aggressively expands into AI hardware, it could challenge Nvidia’s dominance in AI-specific GPUs, a sector experiencing exponential demand due to generative AI advancements.

Additionally, Arm and SoftBank are working with Broadcom on a custom-built AI chip for SoftBank’s data centers. The project is estimated to generate up to $30 billion in revenue for Broadcom, according to Reuters, citing a research note from JP Morgan analyst Harlan Sur.

The note further suggests that if Arm aggressively moves into AI hardware, it could position itself as a direct competitor to chip giants like Nvidia and AMD. While Arm has not publicly confirmed these ambitions, its efforts to recruit top chip executives and secure strategic deals suggest a clear intent to expand beyond its traditional licensing business.

For decades, Arm has been a neutral provider of chip design technology, licensing its IP to major semiconductor firms without directly competing with them. That model is now changing, and the ripple effects could be significant.

If Arm continues expanding into chip sales, enterprise customers may need to rethink their reliance on its technology. Companies that once viewed Arm as a trusted partner may now see it as a direct rival, potentially reshaping the semiconductor market and forcing shifts in supply chain strategies across the industry.

Source: NETWORKWORLD

Cite this article:

Priyadharshini S (2025), “Arm Secures Meta as Its First Customer in Chip Expansion, Taking on Industry Giants,” Anatechmaz, pp.108