Sections of this information page:
– Excerpts from ARM Holdings plc Q4 2012 Results ROADSHOW* SLIDES [Feb 4, 2013] showing the market opportunities
– ARM Holdings PLC Reports Results For The Fourth Quarter And Full Year 2012 [press release, Feb 5, 2013] and related Presentation, excerpts showing the essence of the company operations
– ARM Processor Guide [ARM Holdings, Oct 25, 2012], excerpts showing the major characteristics of ARM processors
– Founding CEO of ARM Bestowed GSA’s Highest Honor [GSA press release, Oct 23, 2012], also about the beginnings (via an 18 minutes long videography) of the ARM as a company
– Warren East on CNBC discussing ARM’s Q4 and FY 2012 results [CNBC in Europe, Feb 5, 2013] excerpts best reflecting the current situation …
– ARM Annual Report 2012 [March 1, 2013] containing the latest and most comprehensive information
– Cortex-A7 – Low-Power Leadership for A Smarter Future [‘USD 99 Allwinner’ blog, Jan 7, 2013]
– The future of the semiconductor IP ecosystem [this same ‘Experiencing the Cloud’ trend tracking blog, Dec 13, 2012]
– Fast 3d party IP [‘USD 99 Allwinner’ blog, Dec 28, 2012]
– Intel targeting ARM based microservers: the Calxeda case [this same ‘Experiencing the Cloud’ trend tracking blog, Dec 14, 2012]
– Implementing ARM Cortex-A7 in a 14nm Samsung FinFET Process [ARM Holding’s SoC Design blog, Feb 5, 2013]
– Low Power and its Future? [SoC Design blog from ARM, Feb 11, 2013]
Five years ago, ARM R&D Fellows Robert Aitken and David Flynn presented several low-power design and implementation techniques which were discussed in detail in their book (co-authored by Michael Keating, Alan Gibbons and Kaijian Shi from Synopsys) titled “Low Power Methodology Manual – For System-on-Chip Design.” This manual has been well appreciated by the industry. Anil Mankar, Sr. VP and Chief Development Officer from Conexant Systems remarked, “The LPMM (Low Power Methodology Manual) enables broader adoption of aggressive power management techniques based on extensive experience and silicon example with real data that every SoC designer can use to meet the difficulties faced in managing the power issues in deep submicron designs.”
Fast forward five years. In today’s high performance and low power chip designs, we seem to be using in automated flows almost all of the low-power techniques discussed: clock gating, power gating, multi-Vt, multi-VDD and adaptive scaling in the form of dynamic voltage and frequency scaling (DVFS) or adaptive voltage scaling (AVS). The LPMM also discusses the importance of selecting physical IP to support the goals, specifically the low-power goals, of a given design. Just as low-power techniques are evolving, so too is the physical IP used to implement these techniques.
Several recent announcements highlight the ARM commitment to emerging technology; a great example of which is the popular FinFET. An announcement on the ARM-TSMC collaboration for FinFETs can be read here. And the press release discussing the GLOBALFOUNDRIES-ARM collaboration for FinFETS can be read here.
We should really give a big thanks to FinFETs as they provide higher mobility, reduced body effect, and reduced device capacitance. This enables both high performance and lower power. The improved Ion/Ioff ratio makes the FinFET a more efficient switch. Isn’t that great? It will be very interesting to see how these well-proven, low-power design techniques such as DVFS are deployed when we move down to 16nm and below with FinFETs.
Low power has been embedded in the ARM DNA since the beginning. The original ARM mission statement integrated designing for low power and high performance. Over twenty years later, the ARM processors and architectures have proven to be highly tuned for low power while still achieving high performance. The same low power DNA is engrained in all of the ARM Artisan Physical IP products. Artisan Physical IP offers low-power IP while maintaining high performance. Standard cells/logic libraries, SRAM memories, register files, and POPTM IP all have one thing in common: low power. Although power optimizations have to be addressed at different levels such as system, architecture, RTL, chip and block levels, ARM’s view on low power is that it must start at physical IP level. Physical IP is designed for particular process utilizing available Vt options. The ARM Power Management Kit (PMK) along with ARM multi-channel libraries provide process and Vt choices to help designers optimize power not only at the block level, but also at the chip and system level.
I recently had the opportunity to present “Low Power Design with ARM Physical IP and POP IP” at a low-power technology summit event, hosted by Cadence. It was a packed auditorium with an audience of approximately 200 designers, technical managers and architects of Low Power SoCs. The day started off with a visionary key note speech from the low power “rock star” Dr. Jan Rabaey from the University of California at Berkeley. The following are some of my key takeaways from this event and these techniques are certainly going to buck the trends for the future of low power. Continued voltage scaling (because power is proportional to CV2); self-adaptation (self-timed circuits); “razorized pipeline”; statistical, or non-deterministic, computing (this sounds like some “random” fun); emerging devices (nanowires and of course FinFETs); NEMS (nanoelectromechanical systems) and energy proportional systems (for example thermal monitors, PVT [Process, Voltage, Temperature (EE)] sensors, leakage sensors and even aging sensors!). These very advanced low-power techniques look so promising that an overall energy reduction of 10X could very well be achieved. As chip designers and system architects, we seem to be leaving performance and power on the table because we tend to over-margin in designing for worst case scenarios. Eliminating margins will result in zero margins and even “negative margins.” This is where analog design techniques have to be incorporated into digital implementations to save power and thereby keep the globe green!
On a lighter side there were also some very interesting facts about our own human brain. Did you know that an average power consumed by a human brain is about 20 Watts!? This is roughly about 15 milliWatts/cm3 with a storage capacity of 100K TeraByte. I wonder how many CPUs and storage devices you need to build such a massively parallel and statistical computing machine (aka our own brain!) with a nearly unlimited storage capacity.
So you might wonder, what’s next? Gone are the days where you design a digital chip for one PVT [Process, Voltage, Temperature (EE)] corner and for a worst-case scenario. Think about a chip where you can seamlessly control variations, change voltage, temperature and frequency with ease, saving a ton of power by going in and out of several different power-down or leakage-saving modes. Making use of analog techniques to lower power in digital circuits is truly a way forward, and the future looks even brighter and greener.
With so many positive developments, I wonder what the next five years will bring.
Sathyanath (Sathya) Subramanian, Technical Marketing Manager, ARM, is responsible for technical marketing for POP Products and is part of ARM’s Physical IP Division. Sathya recently joined ARM, bringing more than 15 years of high-performance/low-power ASIC/SOC design and implementation experience. He holds MSEE and MBA.
Excerpts from ARM Holdings plc Q4 2012 Results ROADSHOW* SLIDES [Feb 4, 2013] showing the market opportunities
* The roadshow is for investors: (as per Investor Relations Calendar) Feb 6-7: London with Goldman Sachs; Feb 8: Edinburgh with Redburn; Feb 11-12: New York with UBS; Feb 13: Boston with William Blair; Feb 14: San Francisco at Goldman Sachs Technology and Internet Conference; Feb 15: Los Angeles with Pacific Crest; Feb 25-25: San Francisco at Morgan Stanley Technology Conference; March 8: London with Numis; March 12-13: Taiwan at Bank of America Merrill Lynch Taiwan, Technology & Beyond Conference; March 12-13: London at UBS Technology Conference
Such roadshows are quite essential to ARM Holdings business operations as these were (and are) essential to drive the value of the company with prospecting the market opportunities. There was a 10-times increase in the share price in the last 4 years as you could see from the chart below:
The excerpted information from the latest roadshow slides will present ARM Holdings own assesments for its future market opportunities. As such this is quite relevant for other audiences as well. This is the reason why I am including here these excerpts as all this is the best kind of assesment one can provide (notice that investors are relying on their own assesments as well so ARM Holdings should be extremely careful with its own assesments).
- Global leader in the development of semiconductor IP
– R&D outsourcing for semiconductor companies
- Innovative business model yields high margins
– Upfront license fee – flexible licensing models
– Ongoing royalties – typically based on a percentage of chip price
– Technology reused across multiple applications
- Long-term, secular growth markets
– Approximately 960 licenses Growing by ~100 every year
– Over 320 potential royalty payers
– 8.7bn ARM-based chips in ‘12 ~25% CAGR over last 5 years
Royalty Opportunity in Smarter Phones
– 1.9 billion handset opportunity for Cortex-A processors and Mali graphics
– Average royalty revenue per handset continues to increase ~10% CAGR as entry-level handsets replace low-cost and feature phones
- With choice of suppliers, OEMs are innovating with new types of products
– ARM technology can be used for applications processing, connectivity and storage
– Standard software is available today and enables all form factors to connect to the internet and display all the web pages, play videos, network with friends …
- Consumer products becoming increasingly connected
– Mobile baseband, WiFi, Bluetooth & GPS
- Local storage increasing for when we are not connected
- ARM provides efficient, reliable processors for real-time communication and control
Billions of Microcontrollers
ARM’s Opportunity in Computing
- ARM is benefiting from increasing diversity in computing and internet connected devices
- PC-class OSes run on ARM: Chrome, Windows & Ubuntu
- More than 1 million apps already run on ARM based devices
- S/W developers tend to prioritise most prevalent architecture
ARM’s Opportunity in Servers
- Data centers are power-constrained – need more capacity without additional energy costs
- 15 licenses now signed for server applications
- First ARM v8-A (64-bit) servers in 2014
ARM’s Opportunity in Networking
Innovating for Mobile and Computing
- big: Cortex-A15
– 2x performance of current smartphones in same low-power envelope
– 8x performance for mobile computing
- LITTLE: Cortex-A7
– 1/5th the size and 5x energy-efficiency of current smartphones
– Multi-core capable – delivering higher performance
– High-performance and low power
– Automatically selects the right processor for the right job
– Dramatically increases power efficiency
– Available for both Cortex-A7 and Cortex-A15, and Cortex-A53 and Cortex-A57
64-bit Processing from ARM
– 3x performance of 2012 smartphone
– 64-bit support for enterprise applications
– Scalable beyond 16 cores
– Equivalent performance of Cortex-A9 but 40% smaller and 4x more efficient
– 64-bit support
- big.LITTLE configuration allows peak performance at low power
- First Cortex-A50 series chips available from 2014
- Chips containing ARM’s Cortex-A50 series processors will command higher royalty rates
Delivering More Value Per Chip
- ARM is developing more advanced technology, delivering a greater benefit to customers and generating a higher royalty percentage per chip:
– More capable processor – Cortex-A family in early days of penetration
– Multiple processors per chip – 150m Mali shipments in 2012, big.LITTLE shipping 2013
– Physical IP penetration – more design wins at smaller geometries
– Higher royalty for v8 architecture – production ramp starting in 2014
Impact of Functional Integration
- Integration of multiple functions into a single chip has limited overall impact on ARM total royalty revenue
– Chips containing multiple ARM processors yield higher royalties
Growing Mali Penetration
- Mali is the most widely licensed graphics processor
– 75 licenses; 54 partners
- Growth in adoption of GPU Compute
– 9 licensees for Mali T600 range of graphics processors
– High performance, low power GPU compute enables new software applications
– E.g. computational photography, multi-perspective views and real-time photo editing
- Mali share gains continue as multiple Partners ramp to volume
– 150m units in 2012
– 2012 market penetration
>70% of DTVs
>50% Android tablets
15% of smartphones
– Expecting >25 partners to ship in excess of 240m units in 2013
Roadmap to Graphics Leadership
- Advanced graphics for CE and mobile
– Higher screen resolutions
– Richer, more complex user interfaces, applications and games
- Graphics and GPU Compute for mobile computing
– Enabling next generation use cases
– Combine ARM and Mali processors into a unified computing sub-system
- Roadmap aligned with market to give uncompromised choice balancing
– Die area (cost and yield)
– Compute capability
– Software requirements
ARM Holdings PLC Reports Results For The Fourth Quarter And Full Year 2012 [press release, Feb 5, 2013] and related Presentation, excerpts showing the essence of the company operations
FY 2012 – Revenue Analysis Revenue ($m)***
FY 2012 FY 2011 % Change PD Licensing 287.1 236.5 21% Royalties 417.7 356.9 17% Total PD 704.8 593.4 19% PIPD Licensing 52.2 49.2 6% Royalties1 56.2 48.7 15% Total PIPD 108.4 97.9 11% System Design Division 54.9 52.4 5% Services 45.0 41.3 9% Total Revenue 913.1 785.0 16%
1 Includes catch-up PIPD royalties of $4.4m (£2.7m) in FY 2012 and $4.5m (£2.8m) in FY 2011.
Q4 2012 and Cumulative Processor Licensing Analysis
Cumulative Total* ARM7™ 171 ARM9™ 273 ARM11™ 1 1 80 Cortex-A 13 2 15 132 Cortex-R 4 1 5 33 Cortex-M 2 4 6 168 Mali 7** 7 75 Other 1 1 2 24 Total 27 9 36 956
* Adjusted for licenses that are no longer expected to generate royalties
** Includes one existing ARM customer taking their first Mali license
Q4 revenue came from the sales of about 2.5 billion ARM processor-based chips, up 13% year-on-year. ARM’s average royalty revenue per chip increased to 4.8 cents, compared to 4.5 cents one year ago, driven primarily by strong growth in Cortex-A class processor shipments (doubling year-on-year) and in the number of chips containing Mali graphics (increasing more than four times year-on-year). ARM typically receives a higher royalty percentage for chips incorporating Cortex-A class processors and an additional royalty if these chips also contain a Mali graphics processor. In Q4, about a quarter of Cortex-A based chips also contained a Mali processor.
ARM continued to gain share across all its target markets. Sales of ARM processor-based chips into consumer electronics, including digital TVs and set-top-boxes were particularly strong, more than doubling year on year. ARM processor-based microcontrollers also performed well, increasing 25% over Q4 last year.
Q4 2012 Processor Unit Shipment Analysis
Processor Series Unit Shipments Market Unit Shipments ARM7 33% Mobile 51% ARM9 19% Enterprise 16% ARM11 8% Home 5% Cortex-A 11% Embedded 28% Cortex-R 3% Cortex-M 26%
During the quarter ARM signed three further royalty bearing platforms licenses. These included two more licenses for 14nm FinFET and another platform license with a leading foundry at 40nm. ARM has now signed a total of 99 platform licenses.
Q4 2012 and Cumulative PIPD Licensing Analysis
Total Platform analysis
Royalty Bearing Foundry
Platforms at Each Node *
New Royalty-Bearing 14nm 2 16/14 4 Foundry Platform Licenses 40nm 1 22/20 4 32/28 8 45/40 7 Total for Cumulative 65-130 38 Quarter Total 180 to 250 38 POP IP 5 41 Total 99
* Adjusted for licenses that are no longer expected to generate royalties
ARM continues to see strong demand for physical IP optimised for use with processors (POP IP). POP IP enables the licensee to more readily achieve high-performance, low-power processor implementations through specially optimised physical IP technology. For every chip implemented using POP IP, ARM receives a royalty both for the processor in the chip and for the physical IP.
At 31 December 2012, ARM had 2,392 full-time employees, a net increase of 276 since the start of the year, being mainly engineers joining ARM’s processor R&D teams. At the end of Q4, the group had 993 employees based in the UK, 583 in the US, 296 in Continental Europe, 347 in India and 173 in the Asia Pacific region.
ARM Processor Guide [ARM Holdings, Oct 25, 2012], excerpts showing the major characteristics of ARM processors
The ARM processor portfolio provides designers with a range of solutions for applications across the full performance spectrum, from the extremely low cost Cortex™-M0 and Cortex-M0+ processor to the high-performance, >10k DMIPS Cortex-A53 and Cortex-A57 MPCore processors as well as the Mali family of Graphics Processing Units (GPU)
This document provides more information about ARM, the processors and the development tools available, which can be used to support your design.
ARM7™ Processor Family
The ARM7 processor family is a range of 32-bit RISC processors optimized for cost and power sensitive applications. The ARM7 processor family feature a 3 stage pipeline execution unit to provide exceptional area
efficiency with very low power consumption, ideally suited for application specific SoC designs. The ARM7 processor family is made up of the ARM7TDMI® and ARM7TDMI-S™ processors.
Typical applications include:
• Mobile phones (baseband processor)
• MP3 players
• Digital still cameras
• Automotive control
(Although still available for licensing, the ARM7TDMI processor has been succeeded for most applications by the Cortex-M3 processor)
ARM9(E)™ Processor Family
The ARM9 and ARM9E processor families comprise a medium to high performance range of 32-bit RISC processors. The ARM9E processor family also features ARM DSP instruction set architecture extensions. The
ARM9E processor family also has an optional synthesizable floating point
coprocessor, the VFP9-S, which supports single and double precision floating point.The ARM9(E) family processors can run at up to twice the frequency of ARM7 family processors. The ARM9(E) processor family consists of the ARM922T™, ARM926EJ-S™, ARM946E-S™, ARM966E-S™ and ARM968E-S™ processors.
Typical applications include:
• Platform OS-based devices
• Point-of-sale terminals
• Audio decoding, speech recognition and synthesis.
ARM11™ Processor Family
The ARM11 processor family is a range of synthesizable processors based on the ARMv6 architecture. All products have support for Thumb, DSP, Java and multimedia architecture extensions. They are very high performance with low power consumption and suit many types of high-end performance applications. The ARM11 processors are available with or without integrated floating point coprocessor. The ARM11 family comprises the ARM1136J(F)-S™ processor, the ARM1156T2(F)-S™ processor, the ARM1176JZ(F)-S™ processor, and the ARM11MPCore™ multicore processor.
Typical applications include:
• Advanced platform OS-based devices
• Next generation wireless, PDAs and videophones
• Set-top box
• High-end laser printers
[additional columns of the above table are not shown in the above image but available in the table within the downloadable PDF document:]
- ARM instructions
- Thumb-2 instructions
- Jazelle-DBX JAVA bytecode execution
- Jazelle-RCT Dynamic compiler support
- TrustZone security
- E’ DSP extensions
- Media SIMD extensions
- NEON SIMD extensions
- Floating point
- Memory Management Unit (MMU)
- Memory Protection Unit (MPU)
- Hardware Cache coherency
- Target OS [Real Time or Platform]
- Trace support
ARM Cortex™ Processor Family
The ARM Cortex family of processors provides ARM Partners with solutions optimized around specific market applications across the performance spectrum. The three series within the ARM Cortex family all implement the Thumb-2 instruction set to address the increasing demands of various markets.
The three categories are:
- ARM Cortex-A Series: applications processors for complex OS and user applications;
- ARM Cortex-R Series: embedded processors for real-time systems;
- ARM Cortex-M Series: deeply embedded processors optimized for microcontroller and low-cost applications.
The ARM University Program, ARM Architecture Fundamentals [ARMflix YouTube channel, June 24, 2013]
Computex 2013 – James Bruce highlights the ARM Cortex-A12 processor [ARMflix YouTube channel, June 4, 2013]
ARM Press Conference: launching Cortex-A12 processor at Computex 2013 [ARMflix YouTube channel, June 6, 2013]
ARM Mali™ Graphics Processor Family
The ARM Mali family of Graphics Processing Units (GPU’s) provides ARM partners with the solutions to support the demand for superior graphical displays on electronic devices.
Two product roadmaps have been developed to provide solutions across the performance spectrum.
The two roadmaps are:
- Graphics – market leading balance of graphics performance, power and cost – Mali-300, Mali-400MP and Mali-450MP
- Graphics plus GPU Compute – premium graphics solutions for high end electronic devices – Mali-T624, Mali-T628 and Mali-T678
Mali Momentum in 2012 and What to look forward to in 2013 [ARMflix YouTube channel, Jan 21, 2013]
The Systems IP group’s position within ARM uniquely enables it to design integrated, high-performance AMBA protocol-based IP products to maximize system efficiency. The ARM Fabric IP group develops and delivers:
• CoreSight™ on-chip debug and trace technology
• The AMBA specification
• AMBA Designer
• A broad range of high-performance CoreLink system IP including:
— High-performance Interconnect
— Memory Controllers
— DMA Controllers
— Interrupt Controllers
— Cache Controllers
ARM Physical IP solutions provide the building blocks to create highly optimized System-on-Chip (SoC) designs. The products are offered in three platform solutions:
• High-performance platforms
• High density (low area) platforms
• High speed PHYs
Within these platforms, ARM offers a wide range of high-performance and high-density, digital and analog products, for the manufacture of advanced SoC.
Processor Optimization Pack™ (POP) solutions targeting ARM Cortex™ processors [ARMflix YouTube channel, April 16, 2012]
Founding CEO of ARM Bestowed GSA’s Highest Honor [GSA press release, Oct 23, 2012], also about the beginnings (via an 18 minutes long videography) of the ARM as a company
Videography of Sir Robin Saxby, 2012 recipient of the GSA Morris Chang Lifetime Achievement Award. [ARMflix YouTube channel, Feb 5, 2013]
The Global Semiconductor Alliance (GSA), the voice of the global semiconductor industry, proudly announces the winner of the 2012 Dr. Morris Chang Exemplary Leadership Award: founding CEO and Chairman of ARM Holdings, Sir Robin Saxby. He will be presented with this lifetime achievement award during the GSA Awards Dinner Celebration on Thursday, December 13, 2012, at the Santa Clara Convention Center in Santa Clara, Calif.
“Sir Robin epitomizes what the Dr. Morris Chang Exemplary Leadership Award encompasses,” agrees Jodi Shelton, president of GSA and Mark Edelstone, Analyst at JP Morgan. “We are honored to present this year’s award to someone who is a true technology visionary that helped to transform the embedded processor market and create a partnership centric ecosystem that has created meaningful growth, jobs and success for hundreds of companies within the broad semiconductor sector.”
Sir Robin led ARM Holdings from a start-up company in 1990, to being listed on NASDAQ and the LSE in 1998. Saxby retired from ARM at the end of September 2007. He served as President of the Institute of Engineering and Technology (IET) from 2006 to 2007, where he is still an active Fellow and Past President.
From 1986 to 1990, Sir Robin served as the Managing Director of ES2 Ltd., and was the CEO of Henderson security Systems Limited from 1984 to 1986. Prior to joining Henderson, Sir Robin served in a variety of sales, marketing and engineering management roles at Motorola Semiconductors from 1973 to 1984. Before that, he was involved in design and development with Rank Bush Murphy and Pye TMC.
In 2002, Sir Robin was knighted for services to the information technology industry. He is also a Faraday medalist of the IET and has served as Chairman of the Open Microprocessor Initiative Advisory Group, a European Union panel advising on the collaborative R&D activity in Europe. Sir Robin is a Fellow of The Royal Academy of Engineering and an Honorary Fellow of IET.
Sir Robin received his bachelor in Engineering Electronics in 1968 from the University of Liverpool, where he has been a visiting professor since 1999. He also hold honorary doctorate from the Universities of Liverpool, Loughborough, Essex, York and Anglia Ruskin.
Warren East on CNBC discussing ARM’s Q4 and FY 2012 results [CNBC in Europe, Feb 5, 2013] excerpts best reflecting the current situation (the order is different than in the interview/transcript)
So what comes next here for Arm through 2013?
Well, we’re continuing our programme of investment in new technology, we’re licencing our new products, we’re moving well beyond the mobile space and the mobile computing space, into the infrastructure that sits around that, and looking forward to the so-called internet of things.
Why should the market like what you’re doing increasing
personnel and R&D, and not like it somewhere else?
… our technology is really aimed at the post-PC era, and over the last
five years then the number of devices connected to the internet has grown, Arm’s share has moved from a small share where most of the devices were PCs and most of them being Intel-based, to now three-quarters of these devices are Arm-based and that’s the trend for the future.
… post-PC era obviously means there are a wide range of different devices connected to the internet, so companies that play in this space need to be looking at multiple form factors, small screens, large screens, and everything in between.
… are you irked by the suggestion that a lot of companies, like Apple now, are starting to think about creating their own chips around some of the Arm designs and architecture that you’ve established? You don’t seem to be being paid for what you’ve contributed to the sector, in a sense.
Well, we have indeed signed a few more architecture licences and we’ve put that in our release and companies seek to control more of the design space and differentiate their products more. We are really an ecosystem company, and these architecture licences can benefit from that ecosystem. From a business point of view it’s exactly the same for us. We earn licence fees and royalties in the same way. Market consensus for this year does have us at over $1 billion and we just reiterated this morning that,
based on where we are, notwithstanding competition, notwithstanding an uncertain environment, then we’re comfortable with market expectations.
… we have two different models for our technology: one where we deliver whole designs, and one where we deliver effectively specifications, and we have people who do their own thing. Apple like to control a lot of their design, they do their own thing, but as anybody can see looking at the application space, this is based on Arm architecture, and from a business point of view then the relationship continues.
Well obviously Apple is a thought leader in the space for smartphones and tablets, and in that way, we work with them. However we design our technology into everybody’s tablets and everybody’s smartphones and market shares will shift from time to time, as thought-leaders’ business positions change, but we still regard Apple as a thought leader in the space.
There are some questions as to whether we’re at a point where Tablet and Smartphone sales are going to slow this year, and I just wonder whether you feel that saturation may be close and whether that has an impact on the designs of chips that you licence into these products?
Well obviously this is a sector which has been growing very strongly over recent years, and indeed estimates for this year are for reduced growth, but that’s still a 40% growth that people are looking at in smartphones this year, and what’s important for us is the increased use of technology within the phone. So even though the growth may be slowing, the value of the technology that’s going in there is continuing to drive growth for our business.
ARM Holdings’ CEO Discusses Q4 2012 Results – Earnings Call Transcript [Seeking Alpha, Feb 5, 2013] excerpts
Now, I’m going to step back a little and look backwards 5 years. One of the key drivers for what’s been going on with ARM’s business over recent years has been the PC era, and more importantly, the sort of beginning of the end of the PC era, such that now we’re talking in our statement this morning about the post-PC era. So we thought it worthwhile having a little look from a sort of longer-term perspective.
If you go back to 2007, there were about 400 million devices shipped in the year that connected to the Internet. And most of those, a good 2/3 of those, were effectively a PCs, and the ARM-based smartphones really were only a small portion of that. And there were a number of devices with other architectures as well. And a few years ago and we — 2007 is conveniently 5 years. It’s also the year of the launch of the iPhone. So it’s sort of generally, like, started the smartphone wave.
It’s instructive to think about the applications. And at that stage, there were thousands, major parts in the tens of thousands but only just, thousands of third-party software applications running on the PC, which provided a very powerful ecosystem around those products.
Now fast forward to today, and we’ll call it the post-PC era or the beginning of the post-PC era. And you can see the number of devices connected to the Internet have grown by a factor of 4. It’s now 1.6 billion devices connected to the Internet. And that is, as many of you have heard me say, it’s from the palm of your hand, sort of 2-inch screens, 4-inch screens right up to 84-inch screens in digital TVs. And these are all Internet-connected screens. And when we look at the architectures sat behind there, then you can see that the ARM architecture is sat behind about 3/4 of this massively increased volume. And PCs are still there, of course, and people still buy PCs. And people will want to continue buying PCs going forward as well.
What we mean is not that the PC is finished, but actually, digital products are now much more than just PCs. But it’s instructive to look at the applications and the strength of the ecosystem, because we’ve moved from a situation of thousands, even low tens of thousands of apps to now millions of apps that are available. And of course, these millions of apps have been downloaded billions of times. Some 1.4 million apps between iOS and Android available at the moment and about 40 billion downloads. So the huge growth from 400 million to 1.6 billion has really been driven by smartphones, tablets and an increasing diversity of form factors.
So what’s going to happen going forward? Well, it’s a very competitive market, and who knows what is going to happen to those market shares. But what we would say is that this is all opportunity for ARM architecture going forwards, as the 1.6 billion devices grows by further factor of about 2.5 to, we think, about 4 billion Internet-connected screens over the next 5 years. And obviously, we’re not making any particular comments here about the strength of the ecosystem. Clearly, people are going to be building on those 1.4 million applications, and software developers will be free to choose the platforms that they choose.
So that’s the sort of context around PCs, and we know that PCs, tablets, smartphones, smart TVs is a very important area. It’s very competitive space, but it’s a very important area for our business over the next 5 years. So I thought it was worth that slightly longer-term perspective.
The encouraging thing here is that ARM physical IP is now absolutely at the leading edge of semiconductor process technology. So the new platform licenses sold during the quarter were engaged on 14-nanometer work with the leading foundries. And if you look at where this stuff is starting to generate royalty, then we saw our first 28-nanometer royalties as well during this quarter.
Clearly, ARM physical IP is being adopted more, because you can see underlying physical IP royalty outgrowing the foundry growth as well, so 17% placed [ph] 7%. So that’s it for physical IP, and that’s it for a brief runaround the business as in 2012.
I think it’s worth because some of the costs that we’re bearing in 2012 and some of the investments that we’re making in 2013 is actually about a longer-term story. And this is about addressing the sort of challenges that face our business in the medium term. Clearly, we are investing in R&D. You can see us building the headcount. This is because the technology that we’re working with is getting more complex. It’s getting much harder to implement. We’re facing more uncertainty in those technology developments, and rather than simply face the uncertainty, we’re investing in people. And we’re investing in tools to get around some of those challenges. And when we deliver on those challenges, then consumers and businesses are able to benefit because they have even more capable devices that are even more power-efficient.
Didier Scemama – BofA Merrill Lynch, Research Division
Great. And then the other question is obviously over the last 12 months, there’s been a lot of debate, about your key competitor driving more low-end processor technology ahead of your foundry partners. However, I think over the last few weeks, we found out that the TSMC is going to ramp 20-nanometer quite a bit ahead in terms of volumes that perhaps the market expected. And Samsung is alluding to a 14-nanometer FinFET, perhaps, as early as later this year or second half of this year. So I was just wondering if you combine process technology from your partners on the manufacturing front with big.LITTLE, is it possible that your performance per watt versus your key competitor, in fact, increase in the coming quarters or years?
D. Warren A. East – Chief Executive Officer, Director and Member of Disclosure Committee
Well, obviously, we hope so. We have not really subscribed to this notion that Intel should have a long-term significant technology lead. Clearly, the business model is much easier for Intel to get to a new node ahead of the foundries. The foundries, as I’ve said before, have to support many customers, and it’s a more challenging task for them. But 2012 has seen the foundries, the TSMC, Samsung, GLOBALFOUNDRIES have all talked about their leading-edge roadmap. And UMC is starting to talk about it as well now. And so the same equipment is available for everybody, and there’s no reason why Intel should have a long-term sustainable lead. They just have a sort of little league because it’s easier for them to service effectively 1 customer instead of several. And as you saw me talk about up there, processor optimization packages for 14-nanometers, our physical IP team are engaged with these foundries. You see in the release, we talk about Samsung taping out 14-nanometer Cortex-A7 based test chips with ARM and Cadence, and so it’s real.
Janardan Menon – Liberum Capital Limited, Research Division
… A couple of questions. … The second is just on the Windows 8 Windows RT front. RT has got off to a bit of a disappointing start. How do you see that evolving going forward, and how do you see the ARM ecosystem gaining traction in the Windows 8 operating system? And how long do you think that process could take?
And lastly, your licensing is rising very fast and your number of architectural licenses seem to be increasing. Is that a trend that you’re going to see more and more a bigger and bigger share of architecture license amongst your overall licensee base, which will keep nudging up your licensing levels in future?
D. Warren A. East – Chief Executive Officer, Director and Member of Disclosure Committee
Okay. Next question was Windows RT, what do we think about Windows RT. Well, 2012 was the launch of RT, and our expectation was really satisfied that Microsoft proved they could bring a Windows operating system up on ARM technology. And it works, and it’s fine. It is a very controlled release that Microsoft had done. They have very tightly controlled the number of chips, chip companies they’re working with and the number of chips that they’re working with and the number of OEM customers whom they’re working with as well. And that is a matter for Microsoft. I believe that their 2013 plans are similarly very tightly controlled. But if you want to probe on that, you’ll have to push a bit harder with Microsoft. As far as we’re concerned, we’re pleased to see the platform running on ARM. We think that the world needs multiple operating systems, and we stick with our usual principle of being pretty agnostic. And the rate at which Microsoft takes share or not from other operating system is a matter for Microsoft. But we’re going to target the full range of operating systems that are out there.
On the licensing forecast and architecture licenses, I think you have seen a bit of incremental architecture licensing over the last year, and likely, over the next year or so as well for 2 reasons. As we target a newer, broader range of applications, as we get into things like networking infrastructure and servers, so we’re exposing ourselves to different semiconductor players. And so, for example, Cavium’s license back in the summer of 2012 as an example of that, where they’ve sort of previously been a MIPS house and adopted ARM for some of their networking applications. The other thing that we’re doing at the moment is going through a transition from ARM architecture version 7 to architecture version 8. So the existing architecture licensees are thinking about upgrading. And for those 2 reasons, we are going through a period of seeing sort of some increased architecture licensing. But those are the reasons. There’s not a fundamental shift in the business model. Simon? And then I think we’ll keep on with the pace.
Jerome Ramel – Exane BNP Paribas, Research Division
Jerome Ramel, Exane BNP Paribas. Just to come back to the manufacturing part of the story from your — from the foundries. It seemed on 14- and 16-nanometer node FinFET from the foundries is not a 14 or 16. At the gate length, it’s still a 20-nanometer node. So it really seemed to me that Intel has the lead. And more importantly from a cost perspective, I mean Broadcom and other companies said that for the first time at 20-nanometer node, they don’t see a price improvement. So I’m just wondering if that negative trend might actually be a positive trend for ARM as customers might be forced to accelerate the roadmap and ask for more leading-edge core from ARM?
D. Warren A. East – Chief Executive Officer, Director and Member of Disclosure Committee
It’s certainly a feasible line of thought. I mean I maintain that what matters is not the geometry, whether it’s 14, 16, 20 but what matters is what performance do you get out of the processor? How much area does it take up on the silicone, and how much does it cost to produce the chip. And that’s what really matters. And companies like Broadcom traditionally operate a little bit behind the leading edge of process technology, and they find that a very successful formula. It enables them to get products out to market much quicker because there’s much less uncertainty in the implementation, and that’s what works for their business. The good thing about the ARM business is that we supply our processors to a range of different companies. Some of whom swear by operating just below — behind the leading edge like that. Others choose to operate at the leading edge, swallow the uncertainty and the iteration and go for the leading edge. And what matters to us is semiconductor companies getting ARM chips out at the right levels of performance for the market at the right price for the market. And we recognize that different people have different approaches, and we have to support all those approaches.