July 30 (Reuters) - Arm Holdings is investing in

developing its own chips, CEO Rene Haas said on Wednesday,

marking a major shift to its model of licensing its blueprints

to other companies.

"We are consciously deciding to invest more heavily - is the

possibility of going beyond (designs) and building something,

building chiplets or even possible solutions," Haas said in an

interview with Reuters.

Chiplets are smaller, modular versions of a so-called

monolithic processor that performs specific functions. Designers

will stitch several chiplets together to form a complete

processor.

Arm has been recruiting from its customers and competing

against them for deals as it pushes toward selling its own

chips, Reuters has reported.

The investments Arm is making are an extension of its

approach to building more complete designs, known as CSS, Haas

said.

Haas declined to provide a timeframe in which the company's

investments in the new strategy would translate into profit, or

give specifics about potential new products that are part of the

initiative.

This expansion of its business puts the chip tech provider

Arm in competition with some of its customers, including Nvidia ( NVDA )

, which builds their own processors on top of Arm's

architecture.

The company also forecast second-quarter profit slightly

below estimates on Wednesday, as global trade tensions threaten

to hit demand for the chip architecture provider in its mainstay

smartphone market.

The company's chip technology powers nearly every smartphone

in the world, and its tame forecast underscores uncertainty

faced by global manufacturers and their suppliers resulting from

U.S. President Donald Trump's tariff policies.

UK-based Arm forecast adjusted per-share profit between 29

cents and 37 cents for the fiscal second quarter, the midpoint

of which is below analysts' average estimate of 36 cents per

share, according to LSEG data.

The company generates revenue through licensing deals for

its intellectual property and a royalty charged for each chip

sold that uses its technology.

Smartphones remain Arm's biggest stronghold. Morningstar

analysts expect Arm to continue as the dominant architecture in

smartphone processors, where it has a 99% market share.

Global trade tensions, however, cloud the outlook for the

market.

Uncertainty fueled by tariff volatility and ongoing

macroeconomic challenges has tapered end-market demand, with

global smartphone shipments increasing just 1% in the

April-to-June period, according to International Data

Corporation.

The company expects current-quarter revenue between $1.01

billion and $1.11 billion, in line with estimates of $1.06

billion.

The company reported first-quarter sales of $1.05 billion,

coming in just shy of estimates of $1.06 billion. Adjusted

profit of 35 cents per share was in line with estimates.

It has also made attempts to diversify into the booming data

center market, where customers such as Amazon's ( AMZN ) cloud

unit use its technology.

The company's chip architecture also competes against Intel ( INTC )

and AMD's longstanding x86 stronghold in the server central

processor market - a booming area in the AI industry where CPUs

are used alongside advanced graphics processors in data

centers.