Smartphone Saturation Hampers ARM’s Royalty Revenues

Pre-tax profits at British chip designer ARM Holdings increased by 19 percent to £95.5 million in the fourth quarter of 2013, despite slower sales of high-end smartphones in the second half of the year affecting the company’s full year financials.

ARM does not manufacture any chips, but instead develops processor technology and licenses its designs to other companies. Revenue was up by 15 percent to £189.1 million, thanks to a seven percent increase in royalties for its designs.

“ARM saw good progress in Q4 as our latest technology was chosen by major companies in all our target markets, with further licenses signed for our latest ARMv8-A processors, Mali graphics processors and physical IP technology,” says ARM CEO Simon Segars. “These design wins will help to drive ARM’s future royalty revenues.”

ARM Q4 results

Segars says ARM shipped 2.9 billion chips during the whole of 2013, 16 percent more than 2012, with strong growth reported in entry level mobile devices, microcontrollers and smart sensors. It agreed 26 new licences in the past 12 months, contributing to a 24 percent rise in full year revenues to £714.6 million and a 32 percent increase in pre-tax profits to £364 million.

“This takes our cumulative shipments since 1993 to more than 50 billion chips, with over 10 billion reported as shipped in 2013 alone,” adds Segars.

However it says that royalty revenues grew faster than the rest of the semiconductor industry during 2013 at a rate of about 19 percent, despite slowing demand for top of the range handsets. It ssays it expects royalties to grow at a similar rate to the past three years in 2014, adding that it enters the year with a strong order backlog and “healthy pipeline” of licensing opportunities.

“In 2013, we continued to improve profitability and increase returns to shareholders at the same time as investing in both R&D and the business infrastructure that underpins our future growth,” says Segars. “2014 brings exciting opportunities and challenges as ARM competes in new markets where we are well positioned to succeed with our leading technology, innovative business model and thriving ecosystem of Partners.”

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