ARM Holdings Plc Looks Into Automotive Industry Due to Slowdown in Smartphone

By Staff Writer

Feb 11, 2016 01:51 AM EST

Chip designer ARM Holdings will try to undertake automotive industry. The company tried to expand its product as license revenue from smarphone is slowing down and declining stock.

The Cambridge-based company will try to make semiconductors for automotive as demand in that industry will increase in the near future. Chief Executive Officer Simon Segars said in a Bloomberg Television interview on Wednesday, that he believed there will be a 50% increase in demand for semiconductors in automotive industry.

ARM Holdings will try to look into automotive industry as it reported a declining royalty revenue that bring the stock down. "We're doing a lot of work now to develop the products that will be shipped in that future period," CEO Segars said as quoted by Bloomberg.

Semiconductors for automotive industry will be used in the driver assistance, in-vehicle automation and self-driving cars. Segars predicted the market for that chip-fueled vehicle is growing.

In an interview with CNBC Segars said, "One particular interest right now that's growing strongly is automotive. We look at the future of that and see the potential for a hundred times growth in computing power in cars which is pretty similar to what we've seen over the past five years in smartphones."

"In terms of the market that we can address in 2020, we see that as a $15 billion silicon market which when you do the maths, works out to about $150 of silicon per car. Now you compare that to a smartphone…its' about seven to eight times the silicon content, so great opportunity to us," he further added his optimism in automotive industry.

ARM Holdings reported a 26% increase in net profit for the fourth quarter of 2015 to £91.7 million ($132.9 million), from £72.8 million ($106.1 million) in the same period last year. The revenue also increased 19% rise to £269.1 million ($392.1 million).

Although the company reported a good performance, but Wall Street reported that shares of ARM Holdings were among the leading decliners among blue-chip stocks in Europe. The shares fell 5% in the early trading and later recouping lost ground to trade 1.5% down. This is due to lower revenue expectation in the near future.

ARM Holdings Plc is a company founded in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology to focus on the development of ARM processor. Apple selected ARM processor as its Newton project to develop a handheld device which later became iPhone and iPad.

Its business model is to design chip and licensed the technology to manufacturers that develop its range of products. So far, ARM Holdings hold several license of many CPUs GPUs, SoCs (System on Chips) and microcontrollers. Its business model made the company does not have added value in manufacturing process and only relying on revenue from chip license.

As the company's revenue in smartphone sector is slowing down, ARM Holdings will try to venture into designing chip for automotive industry.

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