Out of ARM's way, Brit chip juggernaut runs over analysts again
Been designing mobile CPUs for years, now everyone wants one
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Last year was a bumper 12 months for the chip artists at ARM: the company's revenues jumped in December above analysts' predictions as tablets and phones found their way into so many stockings, almost all of them packing ARM-designed processors.
Bloomberg pegged fourth-quarter sales at £152.4m, based on averaging 18 different industry ball-gazers' predictions, but ARM managed to confound nearly everyone by grabbing £164.2m ($262m), up 19 per cent year on year. Its pre-tax profit for Q4 2012 was £59.5m, up from £49.7m in the same period in the year before.
This pushed the share price up 5.2 per cent as the Cambridge-based biz's dominance of modern mobile computing continues increase, not least thanks to modern computing moving into the field where ARM is most comfortable - and has been quietly working in for decades.
Across the whole of 2012, full-year revenue in US currency was $913.1m (£578m), up 16 per cent on 2011 despite the fact that the industry as a whole shrank by two per cent. Full-year pre-tax profit was £276.5m ($435m), up 20 per cent on 2011.
ARM doesn't make chips; instead it licenses its processor core designs to silicon-baking customers for a fee, and charges a royalty on each chip shipped by these manufacturers. It makes decent money from flogging development systems and professional services, but the licences are the secondary source of revenue compared to royalties.
In the last quarter of 2012, for example, chip royalties made up 52 per cent of ARM's revenue, dev kit sales made up five per cent, while professional services contributed five per cent, and licences brought in 38 per cent.
ARM's licensing model is attractive to manufacturers, and a significant factor in the success of the Cambridge-based company. Someone like Apple can happily buy ARM-powered chips from, say, Samsung, and then decide it wants to design its own so it just takes out a licence directly with ARM and starts customising and building its own chips.
It's not quite that simple, of course: ARM's RISC cores are normally integrated into a System On A Chip (SoC) which bundles a processor, communications electronics, perhaps some memory and graphics hardware, and input/output controllers on a single piece of silicon, but if the CPU architecture can remain the same it makes the process of changing suppliers a great deal easier.
Nor does the ARM juggernaut show any sign of slowing, so we fully expect analysts to be confounded again come this time next year: the Brit biz bagged two 64-bit ARMv8 architecture licences and five licenses for its Cortex-A50 family. ®
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COMMENTS
Re: All true
ARM are not greedy. They don't gouge the market, and their business model keeps them going with enough cash to keep improving and to stay ahead of competition.
Although it does surprise me how little money they make!
Re: What is the difference between royalties & licences
You pay a fee up front to get a licence to be able to use a particular design then once you are using it you pay a royalty fee on each chip you sell using that design.
Re: Genuine question
The thing is, ARM with all its customers (the ARM ecosystem) is much bigger than Intel in terms of R&D, chip fabs, design capacity, you name it. The ARM ecosystem gets to amortise its design costs across everyone participating (for which ARM takes a small cut). Intel must meet all its development costs from only its own sales.
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