With Thanksgiving in the rearview and the holidays right around the corner, it’s time to reflect on the past year and plan for the next (though many, no doubt, would love to forget 2020). One company that has every right to feel nostalgic at the moment is Arm. The semiconductor powerhouse celebrates its 30th anniversary in business this week, following a record licensing quarter for the company. Arm has also been making waves lately with the massive announcement that NVIDIA will acquire it for $40B. Today, though, I wanted to look at Arm’s big anniversary, its journey as a company and its strategy going forward, based on my recent interview with the company’s CEO, Simon Segars. Let’s get started.
From barn to the big time
Many good tech stories feature humble beginnings, from Bill Gate’s garage to Mark Zuckerberg’s dorm room. As for Arm, it all began with a team of twelve engineers working out of a converted barn in Cambridge. The joint effort between Apple, Acorn Technologies and VLSI Technology flipped the script on its competitors by forgoing fast, powerful and flashy semiconductors to focus instead on smaller, low-power silicon. This novel approach paid off—Arm’s been at the forefront of technological innovation for nearly 30 years and pretty much owns the smartphone, automotive and IoT end point markets.
Perhaps Arm’s first big break was its Arm7TDMI processor’s inclusion inside the first mass-market smartphone, the Nokia 6110, in 1997. Arm’s groundbreaking processor was the first to include Thumb technology, which allows for the transparent decompression of 16-bit instructions to Arm’s 32-bit instructions without compromising on performance. The company busted into the GPU business, in a big way, with its 2006 acquisition of Falanx Microsystems and its Mali GPU. As part of Arm, Mali became the world’s most popular GPU in terms of units sold—the company says it currently ships around one billion GPUs through its partners every year.
Another notable development in the company’s history was the unveiling of its Cortex-M0 processor, which at the time was the lowest power, smallest 32-bit embedded processor to hit the market. Arm entered the HPC game in 2009, and the following year, the company announced its intentions to enter the server market. In 2012, the companies’ partners introduced the first Arm-based PCs. Jumping ahead to 2016, Softbank acquired Arm for $32B. Then, in 2018, TSMC launched the first 7nm CPU, based on Arm’s architecture. Notably, this was almost 12 months ahead of the x86 crew. That same year, Arm made its entry into cloud computing inside of AWS’s industry-disrupting Graviton processor.
As mentioned earlier, Arm has had a remarkably good 2020 despite the pandemic. For the first time, Arm’s CPU cores clocked in at higher than 3Ghz, in conjunction with Qualcomm’s Snapdragon 865. The company’s investment in HPC back in 2009 is now paying serious dividends. In June, the Arm-based Fugaku supercomputer took the number one spot on the Top 500 list of the world’s fastest supercomputers. In the latest rankings, released last month, Fugaku held onto its number one spot. Additionally, this past year Arm scored a big federal contract with DARPA’s commitment to standardize its technology on Arm IP. And then came the big news that NVIDIA will buy Arm from Softbank for the tune of $40B.
Which brings us to the present
In the 30 years since its founding, Arm has grown from twelve engineers in a barn to a 6,500-strong global workforce. By its own estimates, Arm’s technology is currently in use by an estimated 70% worldwide population. Its partner ecosystem has expanded beyond 1,000 businesses, including many well-known industry mainstays. Arm partners shipped its 180 billionth piece of silicon this past year, including over 100 billion from the last five years alone, and plans to ship 25 billion more chips in the coming year.
Arm’s recent Q2 earnings corroborated this growth trajectory, with its total revenue up to 35% year over year on the strength of new offerings such as Neoverse (Arm’s server and network infrastructure CPU), Automotive Enhanced and Ethos (small footprint, low-cost machine learning), as well as new consumption models such as Arm Flexible Access.
This is a company that I believe is firing on all cylinders and has been since the beginning. I do think it needs to be doing more to enable the Windows PC market as its CPU designs are currently getting lapped by Apple’s M1. I know the M1 uses the Arm ISA, but it’s not an Arm CPU design.
Segars at the helm
Simon Segars became CEO of Arm in 2013, but he has been with the company for a remarkably long time. Arm hired him on as an engineer in 1991 as the fledgling company’s sixteenth employee! This factoid impressed me—in the tech industry, it’s practically unheard of for someone to stick with a company for 30 years, even if they try. I see his longevity with the company as a definite strength—it’s hard to replicate the depth of company knowledge and background of someone who’s been around since the beginning.
While Arm’s founders had no inkling of how big the company would eventually get, Segars told me that Arm’s vision was to create a global standard through its licensing business from day one. With 70% of the worldwide population now utilizing Arm technology in one form or another, I have to say Arm executed that vision with aplomb. With its technology inside of fairly ubiquitous devices such as routers, thermostats and smartphones, it’s easy to see how that number could grow even further in our increasingly connected world.
From the original Nokia win to the Fugaku supercomputer win, Segars lauded Arm’s ability to anticipate and evolve its technology in a way that expands the market opportunity for the company. In the case of Nokia, Segars noted that Arm began moving towards packet-based cellular infrastructure in anticipation of smartphones taking off with the impending launch of 3G. While Arm 11 wasn’t Arm’s most successful product, it laid the groundwork for the Nokia win down the road. Arm’s 3G/smartphone predictions came to pass just as expected. Segars also noted that Arm began thinking about VR back in the 2001-2002 timeframe. Though VR is just now growing legs in recent years, Segars cited those days as a sea change in terms of the sophistication and nature of the silicon inside of handsets. Again, we see Arm’s knack for foresight on display.
Around that same time, Arm began gathering together a cohort of architecture licensees across the industry to discuss where the architecture should go and how software could potentially use Arm’s architectural features. This turned into an informal, recurring meeting, which Segars referred to as Arm’s architectural advisory board. I appreciate Arm’s Switzerland-like ability to arbitrate between competitive companies—many of the people involved in these meetings were in direct competition with each other. Yet, they were able to come together to plot trajectories for their respective industries at large. Segars said, and I agree, working together to improve the core building blocks (that is, Arm’s architecture) benefits everyone since software compatibility ultimately starts at the architecture level. The advisory board is still running to this day—a testament to its value for both Arm and its partners. Segars emphasized his intent to continue this brand of community governance as the NVIDIA acquisition goes through and the companies integrate.
Looking to the future, Segars pointed to the acceleration of digitization due to the Covid-19 pandemic and how emergent technology such as 5G and AI will continue to turbo-charge these shifts in the coming years. Segars believes we are on the verge of more and more companies innovating to create the new ways we live our lives in the digital world. Instead of scrambling to keep the wheels on during, say, a global pandemic, in the future, we’ll live so much of our lives digitally (education, telehealth, etc.) that we’ll be much better prepared—at least technologically speaking. According to Segars, Arm is already focusing on the technology that will enable these significant changes, such as AI. He stressed the need for Arm and the industry to innovate at the pace the markets demand during these unprecedented times.
Arm found its winning formula way back in the day and in many areas and built foundational architectures needed to enable tomorrow’s technology before tomorrow gets here. This forward-looking strategy, coupled with the companies’ ability to function as a neutral arbiter in a highly competitive industry, gives me confidence that we will be celebrating Arm anniversaries well into the future. Based on my conversations with NVIDIA, it’s clear they recognize the strength of Arm’s business model and technology, and it will be interesting to see how they intend to add additional value for Arm partners if the deal is approved.
Happy 30th, Arm—many happy returns.
Note: Moor Insights & Strategy writers and editors may have contributed to this article.