LONDON – The leading customer of processor technology licensor ARM Holdings plc (Cambridge, England) by revenue contribution in 2010, according to Nomura Equities Research, comes as a bit of a surprise. The financial brokerage and analysis house says it was Intel Corp. (Santa Clara, Calif.).
That was my reaction too and it begs the question: what ARM-supplied services, licenses or royalties was Intel paying millions of dollars for in 2010? ARM's revenue in 2010 was $631.3 million so a 7 percent contribution means that about $44 million flowed from Intel to ARM – according to Nomura.
I am scratching my head to make sense of this. Could it be some hard disk drive controller that Intel makes by the bucket-load includes an ARM core? Or is there some ARM core that has made its way into some dusty, otherwise-forgotten corner of an Intel memory controller or image processing block that has ended up in an Intel microprocessor?
And guess what? AMD is on the list ahead of the likes of Infineon, Apple and Qualcomm.
I make no defense of the list which is actually 15 entries long, but even if it is just Nomura's opinion it is an interesting talking point.
And it is what Nomura is telling potential investors in ARM Holdings plc in a 53-page note to clients that re-assesses Nomura's long-term view of ARM as a potential investment. Nomura attributes the customer ranking to "Bloomberg data as of Nov. 3, 2011," without much further discussion, except to say that ARM's customer base is broad and the company is not dependent on just a few customers.
Here's that Nomura/Bloomberg list in full, ranked by percentage contribution to ARM's revenue in 2010.
Intel 7.0% TSMC 5.7% Samsung 5.7% TI 4.6% NEC 3.5% ST 3.5% ZTE 2.8% Broadcom 2.6% AMD 2.5% Infineon 2.4% Apple 2.1% Qualcomm 2.0% Fujitsu 1.9% UMC 1.9% Lenovo 1.8%
It would, of course, be very interesting to see an equivalent list for 2011.
Their margins are very low indeed. This has advantages of course (low cost provider) but it also means they are quite tiny compared to the big beasts (Intel, Apple etc.) I have argued that ARM should move into making their own solutions and move up the value chain, but that's a different business model altogether.
Intel's presence in the list may be discredited (see earlier comments in this forum).
TSMC is involved because it makes the chips for many ARM licensees ..and is therefore intimately involved in being licensed itself to integrate ARM cores using ARM physical IP, holding ARM cores and physical IP in its libraries.
Both the foundry and the fabless are held accountable by ARM although the balance of payments depends on the nature and the detail of the licenses.
Not sure how useful this retrospective is, since ARM is just a few weeks away from announcing 2011 (and 4Q11) numbers. However as Peter notes, since this is revenue, you have to look at units multiplied by per chip royalty (which is a % of ASP). More public info - we shared that for 4Q10 (which is based on actual shipments from our silicon partners during 3Q10) that Cortex (A, R and M) was 13% of the 1.8BU shipments for that quarter. We also showed publically that Cortex-A shipments for that quarter was ~55M. So that leaves 234-55 =179M split between Cortex-R and M. MCU shipments for 2010 (which includes some legacy ARM7 and ARM9 devices) was pretty significant overall. But the significantly higher ASPs of apps processors wins out.
Apart from being of questionable provenece, this list is from 2010, which was that bit earlier in the rise of ARM microcontrollers.
The main thing would be that microcontrollers sell for much lower ASPs than microprocessors but the royalty rate tends to be the same percentage rate. So NXP would have to sell a a lot of MCUs to start to climb up any ranking. But perhaps they did in 2011?
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