ARM's smartphone muscle powers jump in profits

Summary:The Cambridge-based chip designer has reported rises in fourth-quarter profits, underpinned by success in smartphones and embedded systems and as it moves into Windows 8-based devices and servers

Cambridge chip designer ARM has seen pre-tax profits jump 45 percent, driven by the success of its architectures in mobile devices and microcontrollers.

Its profits in the fourth quarter were £69m, up from £47.6m year-on-year, while sales increased 21 percent to £137.8m, the company said in its earnings report on Tuesday. For the full year 2011, it saw a 37 percent rise in pre-tax profits to £229.7m and a 21 percent lift in sales to £491.8m.

"ARM has seen strong licensing growth, driven by market-leading semiconductor companies increasing their commitment to ARM technology, and more new customers choosing ARM technology for the first time," the company's chief executive Warren East said in a statement.

The company is best known for designing architecture for mobile phone processors: its Cortex line dominates in Android handsets and is generally believed to underpin Apple's iPhone 4. In the fourth quarter, this mobile segment accounted for 55 percent of its royalties, which are the payments it receives for each piece of ARM-based hardware sold.

However, it reported increasing success in designs for microcontrollers in embedded chips, which are found in devices ranging from smart meters to TVs, routers and printers. "Microcontrollers are driving the volume, and mobile is driving the value," East said in an earnings conference call.

The company will try to build on this success in 2012 with the release of a embedded chip design codenamed Flycatcher, which East said will be the company's "smallest, most low-powered product" yet. Flycatcher is particularly aimed at intelligent sensors. It already has its Big.Little technology, which twins a low-powered chip with a high-powered one to extend battery life, as a tool to maintain its popularity in phones.

Fresh fields

Over the past year, however, the company has made efforts to move beyond these areas. The upcoming Microsoft Windows 8 will be able to run on ARM-based chips, and the company is looking to make headway in laptops and tablets.

"From where we sit, we don't see any difference between those two form factors [laptops and tablets]," East said. "It's really up to the [device manufacturers] as to which form factors they emphasise."

ARM is looking to Android tablets, even though sales of these remain poor compared with those for Apple's iPad. Challenged about this, East said Android tablets should be given "a little bit more time".

"When Android phones were introduced, there was a lot of hype and they didn't take off in a way that reflected that hype. Two years later we're seeing Android phones [being activated] at 700,000 units a day," East said.

He suggested Windows 8 tablets could end up selling better than Android tablets, as "Microsoft have an awareness advantage with users that Android didn't have".

In addition, the company's 2012 roadmap includes ARMv8, a 64-bit architecture that will make its way into servers from the likes of HP. In 2011, ARM entered the server market, taking arch-rival Intel on in a new area.

At the same time, Intel is trying to get into mobile phones and tablets. Asked about Intel's move into Android handsets, East said Intel's technology was "excellent" but that it will have to overcome the huge success of ARM-based Android devices.

"As Intel is making great progress here, ARM is not standing still," he said. "One of the key drivers of Intel's progress is their ability to ramp new semiconductor processes fast [and] you see ARM working with all the leading foundries at the bleeding edge."

"Even as Intel are bringing their 32nm Medfield product to market, we're seeing ARM's 32nm and 28nm products starting to ship. We're seeing ARM engaged at 14nm," he noted.

Development packages

ARM offers development packages to hardware makers, and East pointed to these as an advantage of using its architectures. However, the company saw a five percent decline in revenue from these packages in 2011, which it attributed to the impact of Linux.

"The decline in development systems revenues is largely due to the growth of Linux-based operating systems, which are supported by free software development tools", it said in its statement.

"ARM is now refocusing this business on microcontroller tools and premium toolkits for multicore systems," the company added. "Due to this transition process, we expect that revenues for development systems in 2012 will be broadly flat, year-on-year."

East noted that digital TVs are an "exciting area", as they are becoming smarter and more connected. He said ARM has about 40 percent of the TV processor market but expects this to grow to 50 percent in 2012.

ARM's Mali graphics processor design is "very well positioned in the TV space", he said. It has now sold nearly 60 Mali licences, he added, although he stressed that it takes around four years to go from licensing to royalties.


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Topics: Tech Industry

About

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't be paying many bills. His early journalistic career was spent in general news, working behind the scenes for BBC radio and on-air as a newsreader for independent stations. David's main focus is on communications, of both... Full Bio

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