ARM Case Study: Exploiting IP in a growing end-market

26-Apr-2012 | General Article (Non-News)

ARM Ltd is a designer of low-power microprocessors, which generates revenue by licensing its intellectual property to semiconductor manufacturers. It has enjoyed ten years of unbroken profitability, more than quadrupling its revenues during the same period. This case study shows how providing a solution to a technological problem, and consistently executing a simple but effective business mode.
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ARM designs the core architecture of the processors that form the heart of many contemporary electronic products. It then licenses the designs to semiconductor manufacturers, and does not manufacture any chips itself.
 ARM is dominant in the mobile computing processor market. Its Reduced Instruction Set Computing (RISC) processor designs offer much lower power consumption than alternative architectures.
 Your key questions answered
* What is ARM's business model? Who are its competitors?
 * What are its end-markets? How well has the company performed?
Processor chips are central to many electronic products
 Processors manipulate digital data and coordinate devices by executing programs
 Processors may have CISC or RISC architectures
 RISC processors such as the ARM designs can operate at lower power than CISC
 Low-power processors are ideal for small, battery-operated products
 ARM generates revenue from its intellectual property, not from manufacturing
 Chip design is separable from chip fabrication
 Fabrication plants are major items of capital expenditure
 Third-party manufacturers pay license fees and royalties to ARM for use of its designs
 Personal computing and communication is changing
 Personal computers used to be for complex applications and Internet access
 Mobile phones used to be for voice and SMS, with little or no computing power
 Old boundaries are now blurred by convergence
 New mobile computing devices need high computational power with low battery power
 Mobile computing devices run complex software
 More processing capacity usually means more electrical power consumption
 ARM designs are effective solutions to this technological problem
 ARM has high penetration of mobile computing market, and strong dependence on it
 ARM's chip designs are found in many mobile phones and portable computing devices
 More than half of all chips made from ARM designs each year are found in these devices
 Intel may pose a threat with its Atom processor
 ARM remains focused on R&D
 ARM is willing to spend substantially on R&D
 Optimizing the 'PPA' balance is central to the company's design philosophy
 ARM is present in several dynamic end-markets
 Mobile computing devices remain a key end-market, which is still expanding
 The company has a leading position in designs for hard disk controllers
 It is growing its presence in digital TV and microcontroller markets
 Processors have synergies with other hardware and software
 A processor with a strong market position will tend to maintain it
 Focus on core competencies has led to profitability
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ARM Case Study: Exploiting IP in a growing end-market
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