Despite Shipments of 10 Billion Chips in 2013, ARM Takes Hit on Slow Growth
February 4, 2014 7:59 PM
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Poor sales of premium smartphones and tablets eroded ARM's margins for the quarter, offsetting revenue growth
Even if you're in complete control of the market, you're still at the market's mercy if demand for your product sours. That's an abridged summary of UK chip firm ARM Holdings Plc's (
) record-setting, but "disappointing"
I. High-End Blues
wowing analysts with double-digit growth
over the past several years
, ARM CFO Timothy Score
that ARM shipped an incredible 10 billion chips in 2013. ARM CEO Simon Segars added that ARM has now shipped 50 billion chips worldwide
over its history
But ARM -- which does not directly manufacture or sell chips, but rather designs general cores that it licenses to chipmakers like Qualcomm Inc. (
), Apple, Inc. (
), and NVIDIA Corp. (
) -- fell short of analyst hopes for the quarter.
Nearly every smartphone has one or more ARM processors in it, these days.
ARM's processor licensing revenue rose 26 percent to $107.2M USD, beating the analyst expectation of $94.7M USD. But overall licensing royalties came in at just 7 percent growth at $146.4M USD. The up-front fees that ARM gets from customers (licensing revenue) came in at $127.4M USD, less than the Thomson Reuters I/B/E/S average expectation of $137.9M USD.
A major factor in that miss was weak sales of ARM's licensable mobile GPU cores and lucrative A50 Series cores.
and Samsung Electronics
Comp., Ltd. (
) -- the world's two biggest and most profitable smartphone makers reported
lower than expected unit sales
of its flagship phones last month.
Overall, ARM is seeing strong demand from new sources, such as the appliances market, but is seeing weakening demand in its most lucrative designs -- smartphone cores. Although ARM is inside nearly every smartphone on the market today (with an estimated 95 percent market share), weak sales of high-end smartphones in the quarter led to smaller margins.
II. Still Growing
Still ARM isn't complaining. Comments Mr. Score:
Overall royalties in 2014 we expect to grow at a similar rate to the last three years, broadly 19-20 percent. We continue to benefit from the growth of digital electronics ... from smart consumer electronics such as phones, tablets and TVs, to energy efficient enterprise networking and serves to more embedded computing into things like smart sensors and wearable technology.
ARM CEO Simon Segars [Image Source: Reuters]
CEO Simon Segars acknowledged that as the mobile industry struggled, so too did its chip-champion, ARM. He commented to
Royalty is the thing that people are expressing some concern about. Growth in the fourth quarter was slower than it had been, but royalty growth in the semiconductor industry was only 1 percent.
ARM has committed to a 5-year forecast of 15-25 percent growth per year -- a pretty ambitious mark. Sales may recover in Q2-Q3 when a legion of upcoming Android and Windows Phone devices
sporting 64-bit ARM SoCs
hit the market.
The chip designer is also pushing to try to gain ground in the traditional personal computing market and the server market. Given archrival Intel Corp.'s (
) dominance in both those spaces, though, ARM can count on them for revenue.
Pretax profit for the quarter at ARM was £95.5M ($156M USD), while revenue was £189.9M ($306M USD). Analysts surveyed by Thomson Reuters I/B/E/S
4 percent higher earnings a £99.4M ($162M USD) on revenue of £183.7M (~$302M USD). A
survey of analysts
predicted revenue of $303M USD.
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RE: 5 year forecast
2/5/2014 1:53:38 PM
What does far more efficient have to do with what I said??
Let's do the math Count Chocula.
Processors Sold Net Income $$/Unit Sold
10,000,000,000 450,000,000 0.045 aka 5 cents.
est(400,000,000) 9,600,000,000 $24 per unit
$24 profit (low estimate) vs 5 cents.
Congrats, EPIC FAIL on the slam. Not to mention the smart phone market growth is starting to flatten. Just as the PC market did after its initial rush of unit sales. There are only so many people.
5 years of triple digit growth and ARM is earning less than what Intel dumps in dividends. Pathetic really. Apple on the other hand... They know how to make $$ from an emerging market.
"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997
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