ARM Chips

ARM Holdings is a leading semiconductor IP company that designs and licenses processor architectures and related technologies to semiconductor companies and OEMs worldwide.

ARM's business model is unique in the semiconductor industry, as they don't manufacture chips themselves but instead license their IP to others.

ARM, which initially stood for Advanced RISC Machines but now is simply a brand name, is a company that designs processor architectures used in a wide range of electronic devices.

ARM's product line-up is divided into several categories, each targeting specific applications and markets:

ARM Cortex-M series

These are 32-bit microcontroller CPU cores optimised for power efficiency and deterministic operation. They run at lower clock speeds and lack a memory management unit (MMU), making them unsuitable for running traditional operating systems like Windows, Linux, or Android. However, they are widely used in embedded systems, consumer electronics, and IoT devices.

ARM Cortex-A series

This series is designed for high-performance applications and is commonly found in smartphones, tablets, and other consumer devices.

The Cortex-A series has evolved from the 32-bit ARMv7 architecture to the 64-bit ARMv8 and ARMv9 architectures.

These processors often employ a heterogeneous multi-core design called "big.LITTLE," which combines high-performance cores with power-efficient cores to balance performance and battery life.

ARM Cortex-X series

Introduced in 2020, the Cortex-X series represents ARM's ultra-high-performance CPU cores.

These cores are designed to push the boundaries of single-threaded performance and are often paired with Cortex-A cores in a "1+3+4" or similar configuration, where one Cortex-X core is combined with three high-performance Cortex-A cores and four power-efficient Cortex-A cores.

ARM Neoverse series

Launched in 2018, the Neoverse series targets the server and infrastructure market.

These CPU cores are optimised for high core counts, scalability, and performance, making them suitable for use in data centres and cloud computing environments.

ARM's business model involves licensing its CPU core designs to semiconductor companies and OEMs. There are two main types of licenses:

Core license

This allows partners to use ARM's off-the-shelf CPU core designs, such as the Cortex-A55 or Cortex-X1, in their own SoCs (System on a Chip).

Architectural license

This license allows companies to design their own custom CPU cores based on the ARM architecture. Notable examples include Apple's A-series and M-series processors, and Qualcomm's Snapdragon X Elite.

To ensure compatibility and maintain a cohesive ecosystem, custom CPU core designs must pass a conformity test to guarantee 100% compatibility with the ARM architecture.

The history of ARM (Advanced RISC Machines)

The history of ARM (Advanced RISC Machines) is a fascinating journey that began in the 1980s and has led to its current position as one of the most influential and widely-used CPU architectures in the world.

Here's a detailed overview of ARM's history:

Origins at Acorn Computers (1983-1985): In 1983, Steve Furber and Sophie Wilson, two engineers at Acorn Computers in Cambridge, UK, began working on a new microprocessor design. Their goal was to create a low-power, high-performance chip that could be used in Acorn's next-generation computers. The resulting design, the Acorn RISC Machine (ARM), was first manufactured in 1985.

Apple's involvement and the formation of ARM Ltd. (1990): In 1990, Apple was looking for a low-power processor for its Newton PDA project. They chose the ARM chip and invested in Acorn, leading to the creation of a new company, Advanced RISC Machines Ltd. (ARM), as a joint venture between Acorn, Apple, and VLSI Technology.

Licensing model and early successes (1990s): ARM's unique business model involved licensing its processor designs to other companies, who could then manufacture chips based on the ARM architecture. This allowed ARM to focus on R&D while its partners handled manufacturing and sales. Early licensees included DEC, Intel, and Texas Instruments.

Dominance in the mobile market (2000s): As mobile devices like smartphones and tablets became increasingly popular, ARM's low-power, high-performance designs made it the go-to choice for manufacturers. Companies like Samsung, Qualcomm, and Apple (with its A-series chips) all used ARM-based processors in their devices.

Expansion into new markets (2010s): In the 2010s, ARM began to expand into new markets beyond mobile, including servers, networking equipment, and the Internet of Things (IoT). The company also introduced new architectures, such as ARMv8, which added 64-bit support.

Acquisition by SoftBank and proposed Nvidia merger (2016-2022): In 2016, Japanese conglomerate SoftBank acquired ARM for $32 billion. In 2020, Nvidia announced plans to acquire ARM from SoftBank for $40 billion, but the deal faced regulatory scrutiny and opposition from other tech companies. In February 2022, the merger was terminated due to these challenges.

Future developments and challenges: As of 2023, ARM remains a dominant force in the processor market, with its designs used in a wide range of devices from smartphones to servers. However, the company faces challenges from competitors like RISC-V and potential changes in its ownership structure.

Throughout its history, ARM has been characterised by its innovative processor designs, power-efficient architectures, and unique licensing model. These factors have contributed to its success and made it a key player in the global semiconductor industry.

Competitive Landscape

ARM's main competitors in the semiconductor IP market include Intel, MIPS (owned by Wave Computing), and RISC-V (an open-source instruction set architecture).

However, ARM has a dominant position in the mobile and embedded markets due to their low-power, high-performance designs.

ARM's market share in the smartphone market is around 90%, and they have a significant presence in other markets such as automotive, IoT, and embedded systems.

Future Prospects

ARM's future looks promising, driven by several factors:

Expansion into new markets

ARM is expanding into new markets such as data centres, automotive, and IoT. The recent announcements of ARM-based chips by Amazon (Graviton), Apple (M1), and Nvidia (Grace) for data centre and PC markets demonstrate ARM's potential beyond mobile.

Growth of AI and ML

The increasing demand for AI and machine learning workloads plays to ARM's strengths in energy efficiency and high performance. ARM's Neoverse platforms and the recent acquisition of Treasure Data position them well to capitalize on this trend.

Continued mobile growth

Despite the maturity of the smartphone market, ARM is well-positioned to benefit from the growth of 5G and the increasing sophistication of mobile devices.

Automotive and IoT

ARM's focus on low-power, high-performance designs makes them well-suited for the growing automotive and IoT markets, where energy efficiency is critical.

Technology

ARM's technology is based on the reduced instruction set computing (RISC) architecture, which emphasises simplicity and efficiency. Their key technological advantages include:

1. Energy efficiency: ARM's designs are known for their low power consumption, which is critical in mobile and embedded applications where battery life is important.

2. High performance: Despite their focus on energy efficiency, ARM's designs also deliver high performance, particularly in tasks that can be parallelised such as AI and ML workloads.

3. Flexibility: ARM's IP-based business model allows their customers to customize and differentiate their products while still benefiting from the underlying ARM architecture.

4. Ecosystem: ARM has a vast ecosystem of software, tools, and partners, which makes it easier for customers to develop and deploy ARM-based solutions.

Arm Holdings earnings call for Q4 of fiscal year 2024

Record Revenue Achievements: Arm reported record revenues for both the quarter and the fiscal year, with Q4 revenue up 47% year-over-year. This marks their first fiscal year as a public company, exceeding the high end of the guidance range.

Strong Growth in Royalties and Licensing: The revenue growth was primarily driven by a 37% year-over-year increase in royalties and a 60% increase in licensing revenue. This surge was attributed to the accelerated adoption of v9 architecture and increased R&D investments targeting AI applications.

v9 Architecture Adoption: There was significant growth in royalties, particularly due to the accelerated transition from v8 to v9 architecture, which not only improved royalties but also increased the number of CPUs per chip across various markets, particularly in smartphones.

Diversification and Strategic Partnerships: Arm noted strategic successes in diversifying its business, including a notable partnership with Google for the Axion processor designed for data centres, driven by compute efficiency and cost-effectiveness.

Advancements in Automotive and IoT: Arm introduced automotive-enhanced features with its v9 architecture for the automotive sector and launched the Ethos-U85, a low-power transformer for IoT-based designs.

Compute Subsystems Strategy: The company emphasised its strategy around compute subsystems (CSS), which involves integrating various IP blocks into a full solution. This approach has seen high demand, exceeding initial expectations, and is anticipated to drive significant growth.

AI's Impact on Growth: AI workloads, due to Arm's extensive CPU installation base, have become a significant driver of growth. The need for hardware to keep pace with rapidly advancing AI software has led to a substantial increase in licensing activity.

Financial Outlook: For FY 2025, Arm projects revenues between $3.8 billion to $4.1 billion, representing a 17% to 27% increase year-over-year, with non-GAAP operating expenses anticipated to be around $2.05 billion.

Market Share and Future Expectations: Arm expects continued revenue growth, maintaining at least a 20% increase annually for the subsequent years, driven by robust licensing demand and royalty growth from new and existing technologies.

These points underscore Arm's strong financial performance and strategic positioning in the semiconductor industry, particularly as it capitalizes on key trends like AI and data centre expansion.