ARM Profits Smash Expectations, Rumors Fly:

ARM Semiconductor, the company whose IP drives a lot of the world's smartphone and tablet devices today, posted excellent Q1 results for the past quarter. Revenue was up 26 percent to $185.5 million and the company's growth significantly outpaced the overall growth of the semiconductor industry. It signed a total of 39 licensees for its technology this last quarter, and 35 in Q4 2010.

A total of 1.85 billion ARM processors were manufactured during Q1, even as the licensing firm signed agreements with the likes of Broadcom and LG Electronics. At present, 61 percent of all mobile device processors are based on ARM technology. "We've had a few quarters now where licensing has been extremely strong in terms of the number of licenses and the value of the licensing," ARM President Tudor Brown told IBD. "That obviously makes us feel very comfortable about royalty payments in the future."

This past quarter also saw "several" semiconductor vendors sign agreements with the intent of developing set top / digital entertainmnet boxes. Analyst Nick James, from Numis, agrees that ARM's licensing business is quite healthy, saying: "the licensing performance of ARM is very encouraging for its long term growth prospects..." It is "becoming increasingly apparent that Mali [ARM's own GPU] is a credible competitor in the market for mobile graphics."

The Cortex-A15

ARM's star is ferociously ascending. AMD was recently spotted crowing over the fact that an ARM executive will keynote an upcoming function and multiple companies are touting ARM products they intend to introduce later this year. Even in situations where the company isn't mentioned by name, it's ARM that provides the CPU hardware underlying Nvidia's Tegra/Tegra 2. Microsoft's major CES announcement was that it was developing an ARM-based version of Windows (currently dubbed Windows 8).

At TSMC's Q1 conference call today, Morris Chang cited ARM as a reason TSMC will remain in a leadership position.
 Almost all the smart phones and tablet application processors utilize ARM architecture. As you know, tablets companies are all use ARM or mostly use ARM architecture. And that is again TSMC sets the advantage because we have products with practically all the tablets companies in the world.

And then tablets companies will gain semiconductor market share in these smart phone and tablet segments. That again turns out to be a TSMC advantage, because as I said, tablets companies are our customers, our partners. And as they gain market share, we gain market share.
ARM's not-so-long-term goal is to create a market for itself in non-mobile spaces from set-top devices to netbooks/notebooks. The upcoming 28nm Cortex-A15 will facilitate this growth, but Intel's 32nm Atom will be up and running by the time ARM's champion takes the field. The two chips will go head to head in an area that might've seemed ludicrous a few years ago: servers. While no ARM licensee has announced concrete plans in this direction, ARM is aware of burgeoning interest. Intel, meanwhile, has announced its own line of Atom servers--it's only a matter of time before the two intersect.