ARM sees boon in chip technology licensing in China

British chip technology supplier expects mainland 4G push to boost licensing deals

PUBLISHED : Wednesday, 23 July, 2014, 1:33am
UPDATED : Wednesday, 23 July, 2014, 1:33am

ARM Holdings, the world's leading supplier of smartphone chip technology, aims to build up its licensing business on the mainland, where 4G mobile network expansion is driving global growth in smartphone sales.

The British company, which yesterday posted a 9 per cent year-on-year increase in both second-quarter revenue and pre-tax profit, designs and licenses chip technologies used in about 95 per cent of all smartphones, including those from Apple and Samsung Electronics.

"The thing about our business is that we're helping companies accelerate innovation," ARM chief executive Simon Segars told the South China Morning Post. "We're building a very strong licensing business in China."

Our business is … helping companies accelerate innovation

Segars said eight of the 28 firms which licensed the advanced version of the ARM architecture in the past quarter were from the mainland, the world's largest market for smartphones and a manufacturing base for many electronic products.

There were 2.7 billion ARM-based chips shipped worldwide in the second quarter of the year, up 11 per cent year on year, according to the company.

On the mainland, ARM has an agreement with Semiconductor Manufacturing International Corp, the country's biggest contract chipmaker, to provide a comprehensive chip technology platform for a wide range of consumer applications including smartphones and media tablets.

Segars said he saw "a broader pervasiveness of 4G mobile network services" delivering long-term growth for smartphones on the mainland. "I think we'll see innovation in the high end of the smartphone market," he said.

But he expected mid-priced smartphones, costing US$150 to US$250, and low-cost models, selling for US$25 to US$100, to the big drivers for sales growth.

Bernstein Research analysts Chris Lane and Mark Li said in a report yesterday that mainland market leader China Mobile's 4G subscribers would reach 48.7 million by the end of this year, up from 13.9 million last month.

They said 4G smartphone availability on the mainland was improving, with 128 models released last month. "We believe the lack of choices, especially in the mid and low end, has been the main reason why people were reluctant to purchase 4G handsets," they said.

The increase in volume augurs well for ARM's licensing business, which counts mobile chip giant Qualcomm among its biggest customers. ARM recorded revenue of £187.1 million (HK$2.47 billion) in the past quarter and pre-tax profit of £94.2 million on the back of a 42 per cent increase in technology licensing fees.

Segars said: "The 41 processor licences signed in the second quarter were driven by demand for ARM technology in smart mobile devices, consumer electronics and embedded computing chips."