Moor Insights & Strategy “Investor Corner” is content specifically written for the professional investment community. This analysis was written by Steven Eliscu as part of Investor Corner, L-sq Advisors, October 16, 2013. See important disclosures and disclaimers below.
ARM new product announcements
- Mali 720 new generation graphics – well complements the Cortex A12 announced earlier this year; together, these could provide a strong combination for future lower-end smartphones
- ARM v8-R instruction set architecture (ISA) – new ISA for real-time applications (e.g. car braking/safety systems); there is not a big impact for the market any time soon, but it represents another incremental improvement for ARM (v8-R is still 32-bit but it gains the advantages of the architectural improvements embedded in the v8 ISA, including hardware-accelerated virtualization support)
Internet of Things (think of IoT as billions of interconnected end-point chips comprised of a microcontroller + radio + sensors+ enhanced security) – a big theme of the show – ARM believes it can dominate this market as the massive ecosystem for mobile is leveraged by IoT applications. While Intel could be a longer-term threat with its announced “integrated computing” initiative for IoT based on its 32nm Quark processors, Intel will be mainly intersecting the lower-end of ARM’s Cortex A-class processors, which are in a performance class above microcontrollers.
big.LITTLE – the evolution of this technology is important as its licensees defend against Intel’s push in mobile. The big.LITTLE technology is no longer about “lighting up” either 4 small cores or 4 big cores, but rather it provides an effective way to match the number and type of activated cores to the application requirements (the technical term being heterogeneous multiprocessing or HMP). Thus, going forward, we are likely to see ARM-based implementations with an asymmetric number of small and big cores and even more than two types of cores (e.g. the use of a GPU as a compute core). For existing mobile applications, this may limit Intel’s ability to gain a material advantage, even with a process technology lead, as the ARM vendors partly offset those advantages through a diversity of HMP implementations.
Intel to fab 64-bit ARM (via Altera) – this announcement should not be a surprise as: 1) the FPGA vendors have highlighted that the integration of processors is a key element of future growth and 2) Altera would not have done the deal with Intel if it would not agree to being able to embed its processor-of-choice IP. The ability for Altera/Intel to implement a Cortex-A53 from scratch (as there is no hardened IP block from ARM for Intel) does at least indicate Intel’s cell library and design methodology for foundry customers has become increasingly mature; this bodes positively for Intel to be a competitive leading-edge foundry.
Servers – the incursion from ARM still doesn’t start until 2015, but the threat to Intel appears increasingly credible. What is becoming obvious, especially with Broadcom having announced its 16nm ARM processor chip in mid-October at the Linley Processor Conference is that the diversity of ARM solutions specifically targeted at the datacenter will make it difficult for Intel to plug all of the holes to defend its share and/or margin position. Additionally, there is the possible emergence of a third way where the owners of the mega datacenters (Google, Baidu, Microsoft) could make their own server silicon that limits the growth of the merchant server processor market in the second half of the decade (where merchant ARM silicon may be simply a way-station to captive solutions). A future article will dive deeper into the financial implications.
I do not own a stock position in any company whose stock is mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. L-sq Advisors is a consulting firm that may have in the past, present or future solicited and/or generated consulting services from any company mentioned in this article.
Steven Eliscu is Principal at L-sq Advisors. He brings a unique combination of Equity Research experience – 9 years at UBS, a leading global platform, as a Semiconductor Analyst – along with more than 10 years of senior Marketing and Business Development roles in the technology industry, including 11 years of rising through the ranks at Integrated Device Technology. With this experience, he intimately understands the basis for valuation from the eyes of the financial markets through the lens of his framework for technology value creation. He has a firm grasp of key technology trends (with 3 patents to his name) and the competitive forces driving the tech industry, which have provided the proper context for his understanding of individual companies and ultimately how each should be valued. He developed the basis for his framework based on his experience as an Analyst, and subsequently refined it and brought it to market as the founding Principal of L-sq Advisors.
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