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The story of ARM Holdings: From a barn to Softbank
ARM Holdings, UK's biggest tech firm had rather modest beginnings, but today ARM-based application processors can be found in about 85% of mobile devices
ARM holdings made headlines on Monday when news broke that Japan’s SoftBank Group Corp. was buying the UK-based chip design firm for about $32 billion.
The Cambridge-based company is not well known to most consumers though it is one of the UK’s leading tech firms. ARM designs the microprocessors found inside a majority of the world’s smartphones, including those made by Apple Inc. and Samsung Electronics Co. From the iPhone and Apple Watch down to the cheapest Nokia phone out there, you can be pretty sure that your mobile device has an ARM-designed chip inside.
What’s important to note is that the company designs but doesn’t manufacture these microprocessors. It licenses manufacturing to partner companies such as Qualcomm Inc., Samsung and Apple, who utilize the ARM IP designs to create and manufacture system-on-chip designs, paying ARM a license fee for the original intellectual property (IP) and a royalty on every chip produced. According to the company’s website, in 2015, ARM reported revenue of $1.5 billion and profit of $448.4 million.
However, UK’s biggest technology firm had rather modest beginnings. Tucked away amid ancient colleges, leafy green meadows and the river Cam full of punters, ARM started life as Acorn Computers in a converted barn near the university town of Cambridge in 1978.
In 1990, ARM was spun off from Acorn as a joint-venture between Apple, Britain’s Acorn Computers Ltd and US chip maker VLSI Technology Inc. to develop a chip for the Apple Newton, a personal digital assistant that Apple was developing. It’s another story that the Newton was a flop after its launch in 1993.
Till date, more than 86 billion ARM-based chips have been shipped and over 11,00 licenses signed with over 300 companies helping ARM clock up revenue faster than overall semiconductor industry revenue. ARM estimates that the total value of chips with processors sold in 2015 was about $115 billion, and that by 2020 the value of this market will have grown to about $150 billion.
ARM’s marketplace
Today ARM-based application processors can be found in about 85% of mobile devices, including smartphones, tablets and laptops. Over the past five years, this market has grown by an average of 30% per year. Analysts predict that the average annual growth rate to 2020 of this market is expected to be about 7%. Although this is a lower rate of growth, it still makes mobile computing one of the fastest growing markets in the semiconductor industry, which will continue to benefit ARM.
Taking a cue from the slowdown in the global smartphone market where leading smartphone makers such as Apple saw sales growth lose steam amid market saturation, ARM has been investing in new technologies and business, primarily the “Internet of Things,” which involves connecting everyday items from cars to light bulbs to the Internet. In May, ARM acquired Apical Ltd, a UK-based imaging specialist. Additionally, the company is focusing on designing more chips for routers and other devices in the networking industry, where it currently has about a 15% market share. It expects that to increase to 45% by 2020. At the same time, it is mounting a challenge to Intel Corp.’s near-monopoly in designing chips for giant servers.
Last year, ARM reported that it had shipped around 15 billion ARM-based chips, an increase of 23% from 2014. About 45% of these went into mobile devices, including smartphones and tablets while a large percentage were shipped to new markets, including networking infrastructure and embedded intelligent devices such as microcontrollers and chips for the Internet of Things.
ARM technology is increasingly being deployed in embedded computer systems. The company estimated that in 2015 about 25% of embedded computer chips contained an ARM processor, from chips in washing machines to lift controllers to commercial drones. ARM also signed 173 new processor licenses which will support royalty revenues for years to come.
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First Published:19 Jul 2016, 03:23 PM IST
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