(Reuters) - SoftBank Group's ( SFTBF ) Arm Holdings plans to develop artificial-intelligence chips, seeking to launch the first products in 2025, Nikkei Asia reported on Sunday.

UK-based Arm will set up an AI chip division and aim to build a prototype by spring 2025, the report added. Mass production will be handled by contract manufacturers and is expected to start in the autumn of 2025, Nikkei Asia said.

Arm will pay for initial development costs, which may go up hundreds of billions of yen, with SoftBank also contributing, the report said.

Once a mass-production system is established, the AI chip business could be spun off and placed under SoftBank, the newspaper said, adding that SoftBank is already negotiating with Taiwan Semiconductor Manufacturing Corp and others over manufacturing, looking to secure production capacity.

Arm, SoftBank and TSMC did not immediately respond to requests for comment.

The UK chip designer, which licenses its chip designs and earns funds through royalties, has been expanding into the data center market where operators are looking to build their own chips to power new AI models and reduce their reliance on dominant supplier Nvidia.