ARM Avoids PC Market Trap That Snagged Intel, AMD
ARM Holdings is seeing the benefits of not being too closely tied to a stagnant PC market that has become a drag on rival chip giants Intel and Advanced Micro Devices.
Executives with Intel and AMD earlier this month reported relatively soft financial numbers for the second quarter, with slowing consumer PC sales being named as a key culprit. Top PC makers like Hewlett-Packard and Dell also were hurt by sluggish PC revenue.
Consumers essentially are buying fewer PCs, according to analysts, opting instead for such devices as smartphones and tablets, or awaiting systems that will be released with Microsofts upcoming Windows 8 operating system, which is due for release this fall.
While those trends are dogging Intel, AMD and the PC makers, they are playing right to ARMs strengths. ARM-designed chipsmade by the likes of Samsung Electronics, Qualcomm, Nvidia and Texas Instrumentsare found in more than 95 percent of all smartphones and in the majority of tablets.
ARM executives announced July 25 that the companys profits increased 48 percent from the same period last year, to $61.1 million, on sales of $210.5 million, a 15 percent jump. In all, during the three months that ended June 30, the company said 2 billion chips using its designs were shipped, a 9 percent increase. ARM executives are projecting $875 million in sales for the year, which would be a 12 percent increase over 2011.
ARMs numbers were in contrast to many in the semiconductor industry. Officials with Intel, the top PC chip maker, said July 17 that profits for the quarter fell 4 percentthanks in part to poor consumer sales in regions like the United States and Europe and the struggling economyand lowered its forecast for the current quarter. AMD two days later announced a 10 percent drop in sales.
Other chip makers, like Qualcomm, also have lowered their forecasts for the year.
Analyst firms IDC and Gartner last month said PC sales for the second quarter were flat due to weakening sales and the flagging global economy.
However, smartphone and tablet sales continue to climb, which is good for ARM and its manufacturing partners. For example, Apple officials announced July 24 that the company sold 26 million iPhones and a record 17 million iPads in the second calendar quarter.
At the same time, ARM is aggressively pushing to expand the reach of its energy-efficient chip designs, into such areas as embedded systems, low-power servers and even PCs. That will only further bolster ARMs bottom line, according to CEO Warren East.
ARMs royalty revenue continued to outperform the overall semiconductor industry as our customers gained market share within existing markets and launched products which are taking ARM technology into new markets, East said in a statement. This quarter, we have seen multiple market leaders announce exciting new products, including computers and servers from Dell and Microsoft, and embedded applications from Freescale and Toshiba.
Intel and AMD officials also are looking to grow beyond their traditional PC and server businesses. Intel is making a significant push this year into smartphones and tablets, and also is heavily promoting Ultrabooks, very thin and light Intel-based laptops that are aimed at bolstering the PC market and giving Intel another pathway into the booming mobile device space. AMD is looking to gain traction in tablets, and also its own version of very thin and light laptopsdubbed ultrathinsthat are a little larger than Ultrabooks but come in about $200 cheaper.