It’s not only about mobile
Last week ARM released their Q3 earnings results that were very positive. ARM is well known for its strong presence in mobile and various consumer computing devices but they are making big steps into areas that will face tremendous growth in the coming years.
What is ARM all about?
ARM is all about developing and selling intellectual property (IPR). They sell their design to semiconductor partners that integrate it into their system on chips (SoC) as the application processor. The SoC itself includes other components such as memory, interfaces, radio and video HW acceleration.
ARM partners/customers include most of the chip manufactures which in turn means ARM is present in a large majority of mobile and other consumer electronic devices. In 2014 ARM captured 85% of smart phone application processors market.
Intel came out with its Atom SoC that is not ARM based but its success in the mobile market was rather limited.
ARM generates revenue from licensing their technology and royalties for each chip their partners sell. When selling such enabling technology there is always the balance between how much royalties your customer is willing to pay vs. the investment he will need to make in order to own this technology.
Since the development of the technology provided by ARM is very expensive, even the largest chip manufacturers such as Qualcomm, Texas Instruments and the behemoth consumer electronics company Samsung prefer to use the ARM IPR instead of developing this technology in-house.
ARM claims it would take around $100 million per year of R&D investment for a company to develop this technology in-house. Given this (and even if this number is a stretch), the rapid advancement in technology and the brutal competition between SoC vendors and consumer electronic manufacturers, ARM has managed to create almost a monopoly in their field.
The strong arm of ARM
In the last 3-4 years ARM released a 64-bit designs and expanded it’s offering beyond consumer electronics; it is now competing head to head with Intel also in the server space.
ARM’s offering now include low power designs for networking and infrastructure applications. ARM has built an ecosystem of leading vendors such as AMD, Citrix, Dell, HP and others to make their technology an industry standard.
With the continuing growth of the cloud and specifically enterprise cloud, ARM is generating growth from this field.
ARM is also well positioned for the adoption of IoT and is already winning designs for this market.
In automotive ARM is designed into many types of applications, from basic function of the car, through safety to driver applications and entertainment.
In Q3 only ARM had 38 new licenses to 27 different companies, 14 of them are new ARM customers. Naturally, many of these are startups so some may not deliver their product to market but there are good chances that the new big thing (company) in IoT devices will be based on ARM.
Intel of course is not leaving this market to ARM and has its own offering but their approach is more of a complete solution and not a technology ecosystem as ARM has built. This was the case with the Intel Microsoft partnership and it doesn’t look like the model has changed.
ARM is playing in diverse markets and is wining designs in new growth segments. While is it pretty small compared to Intel it does look like the future is still ahead for ARM.