Chip designer ARM on track for year after encouraging Q1

ARM Holdings, the British chip designer whose technology powers Apple’s iPhones, said it made an encouraging start to the year, reporting first-quarter sales that beat analysts’ predictions on the success of the latest generation of handsets.

Pretax profit rose 24 per cent to £120.5 million, and revenue climbed 22 per cent to £227.5 million.

ARM is being buoyed by a surge in smartphones that take advantage of its more powerful architecture for 64-bit semiconductors found in newer devices, such as Apple’s iPhone 6 and Samsung’s S6, which went on sale this month.

Royalty revenue, the money ARM gets when devices that use its licenses are sold, rose 28 per cent.

Still, this quarter may be more difficult for the industry, ARM said. Sales in the first quarter, which affect royalty revenue in the second, point “to a sequential decrease in industrywide revenues”, the company said. ARM said that this trend is “consistent” with normal seasonal patterns and that sales in dollars should be “in line with current market expectations”.

Sales in the US for the full year will also be in line with estimates, the company said.

Cheaper Devices

Upgrades to faster phones for fourth-generation mobile technology are helping ARM beat an increasing consumer preference for cheaper devices that cut into royalty revenue growth last year. In 2014, about three-quarters of smartphones were shipped to emerging markets and more than 20 per cent cost less than $100, researcher IDC said in March. The proportion of lower- priced handsets is expected to grow to 32 per cent as emerging markets claim 80 per cent of smartphone sales by 2019, according to the report.

Analysts predict ARM will generate full-year revenue of £964.4 million, according to a Bloomberg survey.

Global semiconductor revenue growth is expected to slow this year, according to researcher IHS. Sales increases of chips will increase 5 per cent this year, down from 9.2 per cent growth in 2014 as device makers make more modest increases to memory

Bloomberg, Reuters