ARM has created the chip design that is at the center of virtually every mobile phone on the planet. About 98 percent of all mobile phones use at least one ARM-designed core on their motherboards, according to research from the analyst firm the Linley Group.
That market stranglehold has put ARM in an odd position: Once a company reaches such a lofty market share, there's only two places left to go--down or to another market. So ARM is ratcheting up its efforts to become the chip-design heart of other consumer gadgets such as set-top boxes, digital cameras, printers, and digital televisions.
Of course, ARM has been selling to consumer electronics makers for several years, and the nonmobile phone business already counts for more than a third of ARM's sales. But ARM CEO Warren East wants a lot more than that. Though he won't give a time frame, he wants consumer electronics to eventually account for half of all sales.
"Mobile phones are growing at a healthy rate, but we've said for many years that we want to be the, not just mobile phones," East said in an interview with CNET News.com.
There are big challenges ahead before that can happen. Like all chip architectures, ARM's designs require software to be written specifically for those chips. Companies that have already developed software for competing architectures will be reluctant to switch without a clear case for ARM's technology.
Being the upstart is a switch for Cambridge, England-based ARM. Its main business is designing processor cores that run applications on electronic devices. ARM licenses individual cores to companies that use those designs to build their own chips. It also sells architectural licenses to larger companies like Texas Instruments orthroughout generations of products.
Some mobile phones use up to two or three chips per phone based on ARM cores, said Linley Gwennap, principal analyst with The Linley Group. "Anonymous ubiquity," East calls it. ARM had $418 million in revenue during 2005. That included $90 million generated by the chip design company Artisan, which ARM acquired the year before. Not including that $90 million, ARM's processor division still grew 19 percent.
Mobile phones shipments increased 21 percent in 2005, but growth is expected to slow to between 10 percent to 15 percent this year after shipments of 817 million units in 2005, according to Gartner. While that'sshipping such large volumes, those rates "are not sufficient for the growth that our shareholders expect," East said.
So, with sales of digital gear booming, ARM is looking to convince semiconductor companies to reuse the expertise they've developed with ARM cores in new chips for digital devices. New ARM cores, such as theto speed up the processing of video and games. Those are new features on mobile phones, but strike at the heart of the consumer electronics market that ARM has in mind.
ARM believes that content companies are looking for ways to get theironto both mobile devices and home digital entertainment systems, said Ian Drew, vice president of segment marketing. Given the company's position in the mobile phone market, Drew argues that content companies are intrigued by ARM's drive into the living room because they want to take advantage of the same set of digital-rights management technologies across mobile phones and set-top boxes.
ARM licensed 1.6 billion cores last year, and about 1 billion of those went into mobile phones, Drew said. The remaining 600 million cores represent the fastest-growing segment of the company's business in markets such as set-top boxes, printers, networking gear, and automotive applications. Companies such as Analog Devices, Freescale, and LSI Logic count themselves among ARM's customers in those markets.