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ARM Exploiting IP in a Growing End-Market
ARM Ltd is a designer of low-power microprocessors, which generates revenue by licensing its intellectual property to semiconductor manufacturers. It has enjoyed ten years of unbroken profitability, more than quadrupling its revenues during the same period. This case study shows how providing a solution to a technological problem, and consistently executing a simple but effective business model, has brought the company success.
The ARM business model is based on intellectual property. The company designs the core architecture of the digital processors that form the heart of many contemporary electronic products. It then licenses the designs to semiconductor manufacturers, also charging a small royalty on each physical chip produced. ARM does not manufacture any chips itself. It has followed this strategy from the start.
ARM is dominant in the mobile computing processor market. Its Reduced Instruction Set Computing (RISC) processor designs offer much lower power consumption than the Complex Instruction Set Computing (CISC) processors found, for example, in desktop PCs. This is a vital feature for small, battery-operated products such as smart phone handsets, in which ARM-design processors have a 95% market share.
Design, end-markets, and ‘eco-systems’ are all vital for success. More than half the company’s workforce are engineers, and it invests heavily in R&D. It ensures that its new designs match end-market client requirements by focusing on ‘PPA’: Processing capability, Power consumption, and silicon chip Area. ARM also works to ensure its designs have a fertile ‘eco-system’ of software and hardware from other companies in which to flourish.
Find out more in ARM Case Study: Exploiting IP in a Growing End-Market