A slowdown in high-end smartphone sales has seen chip designer ARM missing analysts' forecasts for its processor royalties.
The UK company, whose chip designs power most smartphones including Apple's iPhone 5 and Samsung's Galaxy S4, reported processor royalties of $130.4m in the fourth quarter of the 2013 financial year. While the sum was up seven percent year-on-year, it was below the $138m forecast by some analysts.
"In Q4 2013 ARM's processor royalty revenue grew faster than the overall semiconductor industry, however the degree of outperformance was impacted by slower sales of chips for high‐end smartphones," ARM said in a statement. ARM's average royalty revenue per chip in Q4 was 4.5c compared with 4.8c a year ago.
"This decline is mainly due to the mix of chips sold with an increase in the number of ARM based microcontrollers and smartcards, where the chip average price is less than one US dollar, and also lower than is typical year‐on‐year growth in higher value applications processors in premium smartphones."
ARM's processor royalties per unit shipped are the lowest they have been since Q4 2011, according to Liberum Capital.
"Processor royalties were six percent below our forecast on slowing growth in high-end smartphone sales … we expect processor royalty trends to continue to be weak as the smartphone and tablet markets continue to slowdown further," it said in a statement.
However, ARM's revenues from processor licensing continue to be strong, up seven percent year-on-year for the fourth quarter, ahead of an industry average of two to three percent.
Revenues for the 2013 financial year were £714.6, up 24 percent from 2012, while full year profits were up 32 percent to £364m.
ARM's partners reported they had shipped 2.9 billion ARM‐based chips in the fourth quarter, a record number despite slower growth in sales of chips for premium smartphones.
Sales of ARM processor‐based chips into embedded electronics, including microcontrollers, smartcards and wearable computing, grew 35 percent year‐on‐year. Enterprise networking also did well, growing nearly threefold year‐on‐year.
Chips using Cortex‐A class and Mali graphics processors grew strongly in the fourth quarter. More than 520m Cortex‐A class processors were reported as shipped, nearly twice the number as a year ago, and about 140m Mali graphics processors were reported as shipped, taking the total for the year to about 400m, up from 150m in 2012.
It said 22 companies signed 26 processor licences with Arm in Q4 2013. The technology licensed includes ARM’s latest Cortex‐A, Cortex‐M and Mali processors and will be used in a broad range of end applications, including mobile computers, servers and smart embedded applications.
Three of the licences signed were for ARM's ARMv8‐A 64‐bit technology, including one architecture licence and two Cortex‐A50 series processors. These processor designs can be deployed into a broad range of end‐markets, including smartphones, tablets, display devices, digital TVs, enterprise networking and low‐power server applications.
Demand for ARM's processors for the embedded market remained strong, with 15 licences signed for ARM's Cortex‐M series technology. Many of these licences will be used in microcontrollers or applications for the Internet of Things.
ARM also signed four further licences for its Mali graphics processors, including an existing Mali licensee upgrading to the latest Mali‐T700 series, and a major semiconductor company licensing Mali for the first time, also choosing the Mali‐T700 series.