ARM expects strong Q3
ARM is in the happy position of having a 94.4% gross margin which is expected to grow because of it’s business model.
“Profit margins are increasing on a medium term trajectory because a great proportion of revenues are royalties which come from cumulative licensing deals so we’re getting revenues from licenses we signed many years ago,” explains ARM CEO Warren East.
This builds in a certain amount of protection from the industry’s downturns. In the 2009 industry slump, ARM dipped a lot less than the industry.
“It’s a very resilient business model,” says East, “that’s why ARM is highly valued.”
Later this year, Microsoft launches Windows 8 which ports Windows to ARM for the first time. What does he expect to happen?
“We don’t control the launch of this product,” says East, “there are three companies making chips for it – TI, Nvidia and Qualcomm – and each of them will supply one or two OEMs which are building products.”
Next year should see handset chip-sets from Intel out on its 22nm finfet process, will that make Intel’s wireless chip-sets competitive?
“We expect the 22nm process will give them some advantage in power consumption, but whether that advantage is sufficient to make them competitive remains to be seen,” replies East, “they’re saying the process will give them 20% more power efficiency but they’re a lot more than 20% less efficient than ARM.”
One ARM licensee, ST-Ericsson, is lauding the benefits of fully depleted SOI, how does ARM see FD-SOI?
“We think it’s pretty good,” replies East, “we think SOI and fully depleted SOI are great approaches. We take note of it. They seem to be getting some excellent numbers.”
Will ARM bring out a processor optimization pack for SOI, linking the physical IP to the processors?
“We wouldn’t do it except in collaboration with ST,” replies East. The trigger for doing it is the market take up of SOI.
ARM had a good Q1 with revenues up 13% and profits up 22% and is expecting a better second half.
Asked why, East replies: “ARM’s business lags the semiconductor industry Analysts expect Q1 is the bottom of the cycle. Companies are guiding 6-8% sequentially for Q2 and that will be reflected in ARM’s Q3.”