South Korean tech giant Samsung Electronics is deepening its strategic alliance with chip architecture powerhouse Arm to co-develop bespoke chips tailored for on-device artificial intelligence. A successful fruition of this initiative could not only secure fresh design contracts for Samsung's System LSI business but also usher advanced process node clients into its foundry operations, representing a pivotal move to penetrate the AI chip market and vie for custom silicon orders.

Reports on September 4 indicate that Arm greenlit the initial Non-Recurring Engineering (NRE) fees for the next-generation on-device AI system-on-chip (SoC) at the end of August, officially kick-starting the project with Samsung Electronics. Under their collaborative framework, Arm will supply the AI accelerator (AIC) architecture, register-transfer level (RTL) design technologies, relay end-client requirements, and oversee project coordination. Meanwhile, Samsung's System LSI division is tasked with SoC design, while its foundry unit plans to handle mass production using advanced 2-nanometer process technology.

Citing insights from industry insiders, the reports suggest that OpenAI is a leading candidate to be the ultimate end customer for this project. As AI capabilities extend rapidly from cloud environments to edge devices, a deeper foray by OpenAI into on-device AI would likely escalate its demand for specialized AI chips. Notably, Arm has already been advancing related mass-production collaborations with OpenAI.

Rising On-Device AI Demand Fuels Custom Chip Momentum

The strategic impetus behind this partnership stems from the surging chip demand driven by the accelerated deployment of on-device AI applications. Unlike conventional AI models that rely heavily on cloud data centers, on-device AI executes certain inference tasks directly on smartphones and other terminals. This approach alleviates cloud computing strain while enhancing response times and data privacy safeguards.

As AI developers pivot toward hardware integration, generic chips may fall short of meeting the computational power, energy efficiency, and cost requisites across diverse devices and use cases. Consequently, custom AI chips have emerged as a focal point of industry attention. The project launched by Samsung and Arm represents a direct response to this evolving landscape.

Examining the collaboration structure, the duo has adopted a Limited Use License (LUL) framework, restricting Arm's contributed technologies to the development of specific client products with clearly defined usage boundaries. Arm functions primarily as a technology provider and development partner rather than directly marketing chips to the broader market.

Once design and manufacturing conclude, Samsung Electronics will supply the final customers directly and monetize the output. This arrangement empowers Samsung to capture revenue from both the chip design and fabrication stages, while leveraging synergies between its System LSI and foundry divisions to bolster its competitive edge in the bespoke AI chip arena.

2nm Mass Production Milestone Also Boosts Samsung Foundry

For Samsung, the project's deeper significance lies in forging a comprehensive 'design-plus-manufacturing' AI chip solution. With System LSI overseeing SoC design and the foundry handling 2nm volume production, both business units can achieve seamless integration within a single initiative. Compared to securing a mere design contract, this model allows Samsung to embed its advanced process capabilities directly into AI chip development workflows, positioning itself as a full-solution contender for future client engagements.

This is particularly impactful for the foundry segment, where hands-on development and mass-production experience with 2nm on-device AI chips carries substantial demonstrative weight. Should the project proceed smoothly, Samsung can accumulate a credible track record of serving AI chip clients with cutting-edge processes, establishing a benchmark for pursuing additional AI accelerator and custom SoC orders down the line.

In an environment where AI chip demand is steadily permeating terminal devices, whether Samsung can leverage Arm partnerships—and potentially OpenAI as a marquee client—to break into the custom AI chip market will serve as a key barometer for synchronized growth across its System LSI and foundry operations.