Arm, the chip design company in which SoftBank holds a 90% stake, is venturing into the artificial intelligence (AI) chip market. According to a report by Nikkei Asia, Arm will establish an AI chip unit to build a prototype by spring 2025. SoftBank is currently in discussions with contract manufacturers, including Taiwan’s TSMC, to produce these AI chips, with mass production slated to begin in the fall of 2025.

This move by Arm comes as the competition in the AI chip industry intensifies. Arm designs the fundamental architecture upon which chips are built and then licenses these designs to companies like Qualcomm and Nvidia, charging royalty fees on each sale they make. The company claims that 99% of premium smartphones are powered by Arm technology.

The initial development costs for these AI chips could reach “hundreds of billions of yen,” according to the report. However, once a mass-production system is set up, Arm’s AI chip business could potentially be spun off and placed under SoftBank’s umbrella.

Arm’s shares have risen nearly 45% so far this year, and its market capitalization currently stands at over $113 billion, according to LSEG data. SoftBank acquired Arm in 2016 for $32 billion and listed the company on the Nasdaq last year.

SoftBank, led by Japanese billionaire Masayoshi Son, is placing significant bets on AI. The company plans to invest $960 million by next year to boost its computing facilities for generative AI. Son has expressed SoftBank’s ambition to “be [in] the leading position for the AI revolution.”

As part of this strategy, SoftBank is reportedly looking to build AI data centers, powered by its homegrown chips, across the U.S., Europe, Asia, and the Middle East as soon as 2026, according to Nikkei.

SoftBank is set to report its earnings for the fiscal year ended March 31 on Monday, which may provide further insights into the company’s AI-related initiatives.

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