By Max A. Cherney and Abhirup Roy

Jan 7 (Reuters) - Chip technology company Arm Holdings has reorganized the company to create a Physical AI unit to expand its presence in the robotics market, company executives told Reuters at CES, where robots are a theme of the year.

The decision to create a unit that specializes in robotics arrives amid a flurry of announcements and activity at CES around humanoid robots. At the sprawling Las Vegas trade show, large and small companies demonstrated robots that could help build cars, clean toilets and deal games of poker - at a glacial pace.

Reuters is reporting the creation of Arm's Physical AI unit and reorganization for the first time. Arm will now operate three main lines of business: its Cloud and AI, Edge - which includes its mobile devices and PC products - and Physical AI, which will house its automotive business.

Robots and autos are the core of physical AI and share a wide range of existing sensor tech and other hardware. Automakers including Tesla are creating robots to automate warehouse and factory tasks. 

UK-based Arm does not make chips itself but supplies the underlying technology that powers most of the world's smartphones and a growing number of other devices such as laptops and data center chips. The company makes money by charging licensing fees and collecting royalties when its designs are used.

The company's expanded focus on Physical AI is part of a larger effort to increase the business. Since CEO Rene Haas took over the company roughly four years ago, Arm has developed ways to hike prices for its latest technology and is considering its own full chip design.

Arm executives see robotics as a market with immense potential for growth in the long run. The head of the newly formed unit, Drew Henry, told Reuters that physical AI solutions could "fundamentally enhance labor, free up extra time" and may have a considerable impact on gross domestic product as a result. That division plans to add staff dedicated to robotics, Arm Chief Marketing Officer Ami Badani said.

The company combined automotive and robotics into a single unit because the customer requirements for things such as power constraints, safety and reliability are similar, Badani said. Several automakers are moving into humanoid robotics, as well.

When asked about customers, Henry said, "We work with everyone." Arm-based chips are used by dozens of automakers around the world, and by robotics companies such as Boston Dynamics, which is owned by Hyundai.

The two companies unveiled a production-ready Atlas humanoid robot that the Korean automaker said it will begin deploying in U.S. factories by 2028.

YEAR OF THE ROBOT AT CES

Interest in humanoid robots has boomed as companies across the tech and auto industries see human-form machines as the next frontier in AI and automation.

Tesla CEO Elon Musk has described the company's humanoid robot project, Optimus, as key to the company's future. Musk has said the robots could eventually dwarf its vehicle business and unlock vast new economic value by performing a wide range of tasks that humans do not wish to perform. 

This year, CES has been dominated by robotics. Reuters observed dozens of companies exhibiting humanoid robots at the cavernous convention center halls. They performed dances, played ping-pong and conducted repetitive sorting tasks. 

Many such machines at CES include forms of artificial intelligence, which further enhance their capabilities.

"(But) the real spend and where things are really moving forward is when they combine the machining with the level of AI to increase the precision, increase the productivity, or change how something's able to produce," C.J. Finn, U.S. automotive industry leader for PwC, told Reuters.

Boston Dynamics CEO Robert Playter told Reuters there was "a bit of a hype cycle around (robotic) humanoids at this point in time." But he said his company has already "put thousands of quadruped robots out in the market and actually (made) money."

Driving technology company Mobileye,  owned in part by Intel, announced that it planned to acquire robotics company Mentee for $900 million in order to bring its product under its roof. 

World AI leader Nvidia unveiled a tool called Alpamayo and other physical AI products that it hopes will power the next generation of autonomous vehicles.

(Reporting by Max A. Cherney; Additional reporting by Abhirup Roy in Las Vegas and Akash Sriram in Bengaluru. Editing by Peter Henderson and Matthew Lewis )