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How tech neutrality paid off for ARM

Nearly 70 percent of the world's cell phones, much of its networking equipment and a variety of consumer electronics are based on ARM's designs. Chairman Robin Saxby explains why playing the role of an IP Switzerland and remaining above the industry fray has been just the ticket.

Robin Saxby, chairman of Cambridge, England's, ARM, runs one of those companies that is both ubiquitous and anonymous.

Nearly 70 percent of the world's cell phones, a substantial portion of networking equipment and a wide variety of consumer electronics run on computer chips based on designs from ARM.

Through Swiss-like neutrality, it can count Texas Instruments, Intel, Palm and Microsoft as its allies. Yet few consumers are likely to ever know about ARM.

Saxby, who was made a knight of the British Empire, spoke with CNET News.com about the future of wireless and the nuances of intellectual-property business.

Q: ARM is a huge company in the wireless world, but not many people outside the tech industry know it.
A: We're actually quite small. We're about 740 people, and about 60 percent of our people are working in research and development. If you like, we are the technology behind all of this technology. We've got a team of talented engineers, and all we do is design and develop the thing (the ARM chip core). Our partners make the chips, and we get royalties from that. And they sell the chips to end users like the Nokias or the Palms or the Sonys or the Nintendos. We are the leading intellectual property licensing company.

Did you start out as a licensing company? Back then, it was a fairly new concept.
Yes. Our strengths were low-cost and low-power. Our weaknesses were that we didn't have a lot of money--we didn't have a lot of market presence, so we invented the partnership model. The company was founded with money from Apple, and the technology came from a company called Acorn in the U.K. VLSI Technology, here in the valley, also put money into it. They were the first manufacturer of ARM chips. Basically, we set out to be the global RISC (reduced instruction set computer) standard, and to some extent, we've achieved that because there's now been more than a billion ARM chips shipped.

Everyone is still talking about the great future of wireless, but we're kind of in a lull right now.
The mobile phone situation, the switch to 2.5 and 3G, is taking a bit more time and a bit more energy than people imagined. You could say there's a bit of a hiccup. It's partially the economy, but bringing new technology to market is always difficult. There's a lovely curve called the hype cycle. This point (pointing to the top of a bell curve) is the peak of anticipation. This is what the numbers are supposed to get to, and this one down here is the trough of despair. Eventually, everything is OK and the market goes its natural way. But from here to here is typically 10 years. I think we're just coming out of the trough of despair.

Does a lot of the problem come from hype or the competing standards?

"Semiconductor partners are outsourcing part of their R&D budget to us. It is more cost effective for them to buy in the standard and use it rather than reinvent the wheel."
No. One of the other issues is that for something to be really useful, the technology's got to be in everything. Take Bluetooth or 802.11. It's got to be in your camera; it's got to be in your phone, in your PC. Only when it's all pervasive does it become really useful. We're definitely at the point where Bluetooth is starting to be OK.

ARM's goal is to work with all the best players to enable as many things to happen as possible and then let the market decide who the winners are. We support Bluetooth, we support 802.11, we support CDMA, we support Microsoft, we support Palm, we support Linux. We're the Swiss of the IP industry.

The technology industry is going to have to work more with content providers in coming out with new generations of entertainment devices. How is that going to work, because it's a completely different industry.
We talk to the music industry and we talk to the (content) operators, and, really, these people don't know a lot about technology. They know about promotion and advertising. It's a whole different industry.

For the user, until you can buy your music through your mobile phone operator and pay for it, the wireless music industry doesn't happen. But there are many aspects of that. First of all, how do you pay for that? Secondly, how do you make sure it's not pirated? There are many, many issues here, but I'm sure in our lifetime we will download the music out of the ether how we want to hear it.

In initial discussions with these content companies, are you far off from getting secure downloading?
I think we are...Maybe there can be some new companies. For an example, think of the Internet. Companies like AOL emerge. Maybe there has to be some new, emerging companies that know something about music and content. We've had Napster, but maybe there is an opportunity for the legal Napster to emerge. The mobile phone operators emerged. They came out of something. There have got to be opportunities.

Will there be a shakeout in the IP segment? There are a lot of chip designs out there.

"We're the Swiss of the IP industry."
There has already been a shakeout in a sense that if we went back to the peak of the bubble, everybody was going to be an IP company. Well, reality is a little different. The thing about being an IP company is that you need a huge support structure. We have something like 2,200 global offices. We're in Shanghai, we're in Tokyo, we're in Taipei, we're in Tel Aviv. We need to be close to our customer base in real time and to make something suitable for reuse as an IP company. You've got to design something that everybody can use in lots of different ways. You can say that to support the product is 10 times more expensive than to invent the product.

That's a lot to keep track of.
The Web, for us, plays an important role. For local support, all of the literature has to be available in the local language. We just translated a whole load of stuff into Chinese, for example. Without the Web, ARM couldn't be as successful as it is. We do physically ship loads of data down the wire to our partners. We have secure Web sites and so on, and all of our literature is downloadable in PDF format rather than shipping books around the world.

In a way, semiconductor partners are outsourcing part of their R&D budget to us. It is more cost effective for them to buy into the standard and use it rather than reinvent the wheel. The pressure on our customers is shortening the time to market with increasing complexity. That is really why we can exist.

In this country, when people think of the high-tech industry, they think of the U.S. and Asia. Europe hardly seems like a factor. Are we being ethnocentric?
Do Americans think that Europeans have got it right on mobile phones? I see different skill sets around the world probably caused by the environment in which they live. I don't feel that one part of the world is smarter than any other part. I think one of the features of Europe is that you've got all the different languages and all of these small regions. Maybe that's why the mobile phone industry developed there. The Nintendo Game Boy came out of Japan. The Nokia phone came out of Europe, and a lot of the networking and computer products came out of North America.

I actually think that because we started as a company in the U.K., it gave us advantages of looking at things differently. We didn't have a huge local market to serve. There are no British semiconductor manufacturers anymore. To get customers, we had to travel. Maybe if we had been in North America it would have been too easy for us.

One last question. You've been knighted. Was this a surprise?
Oh yes. It's actually quite an honor. Not many people get this, and businesspeople usually don't get it. It's sort of a recognition to Britain that technology is important and so is entrepreneurial business.

Did you go through the ceremony?
How this actually works is that you collect the title and then you get the medal six months later. I'm going to (Buckingham) Palace in June. But they will video it and I will take my wife and kids along. The really nice thing is that I've got a parking ticket to park my car in Buckingham Palace grounds. That doesn't happen every day.