ARM iPhone royalties slow as smartphones drop in price

By Danny Palmer
23 Apr 2014 View Comments
An Arm Holdings logo

ARM, the British multinational semiconductor designer that develops the computer chips used in Apple's iPhone and iPad, has reported a decline in the growth of royalties from smartphone and tablet sales.

While royalties from smartphone sales did rise by three per cent to $145m (£86m), it marks a large reduction in growth compared with the same period last year, which saw royalties from mobile device sales rise by 32 per cent.

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ARM-designed chips are used in 95 per cent of mobile phones, but the amount of royalties received per unit has declined in growth due to an increasing demand for budget smartphones. The lower cost of these devices means the value of the Cambridge-based company's cut from each sale is smaller.

Revenue as a whole, however, is up on the first quarter of 2013 from $264m (£170m) to $305m (£187m).

ARM is looking to royalty revenue to continue its growth, but this isn't just restricted to smartphones, with the firm looking to connected devices and the Internet of Things - items such as smart cars and thermostats - as an area it can move into.

"Q1 was a good start to the year for ARM, with more customers choosing to license ARM technology for their future products, which helped drive ARM's revenues," said ARM CEO Simon Segars on the release of the results.

"Licences are a precursor to future royalty revenues," he continued. "Our customers are signing licences with a view to designing ARM technology into an increasingly wide range of markets from servers and supercomputers to embedded sensors and enterprise networking applications and thereby underpinning ARM's future royalty opportunity," Segars added.

A statement by ARM said the Q1 figures represent "an encouraging start" to 2014, with the firm expecting growth as the year moves forward.

"Recent indications from the semiconductor industry and ARM's customers suggest that ARM will benefit from an improving environment in the second half," the company said.

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