ARM-based chip shipments totaled 2.9 billion in Q1
AMD and Intel have their work cut out for them as both companies try to wrestle mobile market share away from ARM. To kick off the first quarter of 2014, ARM Holdings reported total revenues of $305.2 million, up 16 percent compared to the same quarter a year ago. That includes a 38 percent year-on-year increase in processor licensing revenue derived from 2.9 billion ARM-based chip shipments in Q1, which itself is up 11 percent compared to last year.
It's not just smartphones and tablets that are driving ARM-based processor shipments, but also servers, supercomputers, and other segments.
"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. Licenses are a precursor to future royalty revenues. Our customers are signing licenses 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," noted ARM CEO Simon Segars.
Licensing is a big part of ARM's business strategy. Out of the $305.2 million in total revenues it collected in Q1, $129.9 million come from licensing its technologies to companies like Nvidia and Qualcomm. However, ARM isn't immune to market conditions and was affected by lower than expected sales of high-end smartphones running chips based on its IP. As a result, ARM's royalty revenue was $5 million lower than it was in the same quarter a year ago.
"ARM’s royalty revenues in Q1 2014 were impacted by an inventory correction which particularly affected mobile and consumer electronics. As a result, both the year-on-year growth in ARM’s royalty revenues and the outperformance compared to overall industry growth are lower this quarter than seen in most recent periods," Segars added. "Inventory corrections of this type occur in the industry from time to time, the last one occurring in H1 2012."
Another explanation is that the high-end smartphone market is starting to become saturated, though ARM is firm in its belief that the drop in royalty revenue is a temporary blip.