Softbank and Arm will contribute to the development costs and Arm will set up a separate division for the initiative.
The chips will be fabbed by foundries and TSMC is already said to have been approached for capacity.
The plan is to build a prototype by 2025 with production starting in the autumn of 2025.
When mass production is underway, it is reported that the Arm AI unit will be transferred to Softbank to become a separate division of Softbank.