ARM sees boost from high-end smartphones

BARCELONA Tue Feb 15, 2011 12:55pm EST

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BARCELONA (Reuters) - British chip designer ARM said its royalty revenues would be boosted by the speed of adoption of its newest multicore processors that are powering many of the smartphones unveiled in Barcelona.

"We are not surprised by the speed of the roll-out," Chief Executive Warren East told Reuters in an interview at the Mobile World Congress trade fair.

"As they have more functionality, we are giving more value to our customers, and we expect to be paid more."

ARM sells its processor blueprints to chipmakers like Broadcom, Renesas and Samsung for a licensing fee and a royalty on each chip shipped.

Its designs power nearly all the world's mobiles phones, including the new LG Optimus 3D and Samsung Galaxy SII, which run on ARM's dual-core Cortex chips, as well as tablets and microcontrollers in products ranging from toys to running machines.

It receives up to 2 percent of the selling price for its Cortex designs, against nearer 1 percent for older chips.

East said ARM's older designs were finding their way into billions of electronic products, which would delay a lift in the average royalty rate to 2 percent: "If we are very successful in microcontrollers, it could remain below that level forever."

ARM is also beating its rival Intel in the battle for tablets, a category that hardly existed before the debut of Apple's iPad in April, and it received a further boost with Microsoft's move to embrace ARM's processors in January.

East said ARM retained the edge over Intel, which is targeting the mobile and tablet markets. "(Intel) is still a long way apart in processors on the market," he said. "Unless they can make their processors smaller they will struggle."

He also welcomed Nokia's tie-up with Microsoft, which will see it sideline the MeeGo operating system announced in Barcelona with Intel a year ago.

"It's good to see them with a strong direction," he said. "For us it's a broadly positive thing."

He also shrugged off a blow to ARM's ambitions in graphics when STMicroelectronics chose rival Imagination Technologies for its newest processor on Tuesday.

"We still have the lion's share of volume (at STMicroelectronics)," he said. "Design wins in graphics are a little bit less sticky; there's a bit of coming and going."

He said he expected Mali graphic chip shipments to increase from the single-digit millions seen last year to "many tens of millions" this year.

(Writing by Paul Sandle; Editing by Will Waterman)

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