Businessmodel of ARM Holdings

Customer Segments

ARM has a niche market business model, with a specialized customer segment. The company targets its offerings at semiconductor firms and manufacturers that require processors for their devices.

Value Proposition

ARM offers four primary value propositions: accessibility, innovation, performance, and brand/status.

The company creates accessibility by making its products available for a wide variety of applications. Its chips can be used in everything from digital set-top boxes and mobile handsets to network routers and car braking systems.

The company has placed a strong emphasis on innovation throughout its history. It has attained many groundbreaking achievements, including the following:

• Developed the first commercial RISC processor (as Acorn Computers)
• Introduced the first RISC processor for inexpensive personal computers (as Acorn Computers)
• Unveiled the first silicon-on-Insulator Physical IP for IBM’s 45nm SOI Foundry
• Launched the first FPGA-adaptive embedded software toolkit
• Formed the first UK forum to create technology blueprint “Internet of Things” devices The company has demonstrated strong performance for its customers. A high-profile example is PayPal – the company developed a fraud detection system utilizing ARM-based server systems. Compared to standard data center equipment, it obtained major savings in cost (half the usual upfront price), power (one seventh the typical cost to run), and floor space (a tenth of the usual size).

The company has established a strong brand as a result of its success. It bills itself as the world’s leading semiconductor intellectual property supplier. It has distributed over 1,100 licenes to more than 300 companies. Its customers have shipped more than 86 billion Systems on Chips (SoCs) containing its IP, with four billion shipping every quarter. In 2015 alone, they shipped 15 billion of the chips, a growth of 23% year-over-year. ARM claims that its technology is used in 80% of digital cameras, 95% of smartphones, and 35% of all electronic devices. It has 35 offices in 17 countries.

Channels

ARM’s main channel is its direct sales team, through which it acquires most of its customers. The company promotes its offering through its website, social media pages, and events such as seminars, webinars, workshops, trade shows, and technical symposia.

Customer Relationships

ARM’s customer relationship is primarily of a personal assistance nature. The company assists users in the following ways:

Support Services – In addition to general phone and e-mail support, ARM offers one of three levels of support services for clients as part of a contract:

• Support Access – Includes online documentation, an unlimited number of cases/questions, and a substantive response within 24 hours of help request
• Standard Support – Includes everything offered with Support Access, as well as errata updates and delivery
• Enhanced Support – Includes everything offered with Standard Support, as well as on-site help, proactive management provision, project engagement, and a dedicated project manager Training Services – ARM offers training on a wide variety of ARM technology topics, delivered by experienced instructors. Format options include public (conducted by third-party firms in ARM-approved training centers), private, and live remote courses.

Active Assist Service – ARM offers Active Assist, an expert review service through which it provides ARM engineers to help clients optimize their SoC designs and launch products more quickly.

Despite this orientation, there is also a self-service component. The company’s website provides online courses that customers can take on a self-paced basis. It also provides a broad range of self-help resources, including articles, application notes and tutorials, ARM-related books, downloads, developer resources, and answers to frequently asked questions. There is also a community element in the form of a forum where customers can interact with fellow users.

Key Activities

ARM’s business model entails designing, developing, and licensing of processor, systems, and physical IP for customers. Its customers use its IP designs to manufacture SoC designs, paying the company a license fee and a royalty for each chip and wafer produced.

Key Partners

ARM maintains the following partnership programs:

ARM Connected Community – This is a network of over 1,200 firms that design, develop, manufacture, and market products based on the ARM architecture. The company provides a wide variety of marketing resources to assist in the process, including social media, promotional programs, and industry and networking opportunities. It also grants access to the Connected Community interactive platform, where partners can obtain information on ARM-based applications, projects, and designs. Membership in the program is open to firms with a solution that uses or complements ARM technology. Specific partners include Gumstix, TechNexion, and Mentor Graphics Corporation.

ARM Approved Program – This is a program through which ARM utilizes certain firms with expertise in its solutions to provide support to its customers. Partners go through a stringent audit process. Specific partners include eInfochips, Open-Silicon, SoC Solutions, and Sondrel.

ARM University Program – This is a program through which ARM enables usage of its technology in educational environments. The company provides teaching materials, software development tools, hardware platforms, IP, and other resources for teachers, researchers, and students. Partners it works with in the process include Nordic Semiconductor, Rockchip, and Chukong Technologies.

Key Resources

ARM’s main resource is its research and development staff. Approximately 74% of the company’s employees are engaged in engineering activities. The company has offices and design centers around the world, including in the United States, India, Norway, Sweden, France, Germany, Japan, China, Taiwan, Slovenia, and Hungary. Lastly, ARM places a high priority on intellectual property, with over 4,500 issued and pending patents.

Cost Structure

ARM has a value-driven structure, aiming to provide a premium proposition through significant personal service and regular product improvements. Its biggest cost driver is research and development, a fixed cost. Other major drivers are in the areas of administration and sales/marketing, also fixed expenses.

Revenue Streams

ARM has four revenue streams:

• Licenses sold for processors and physical IP
• Royalties earned for processors and physical IP
• Software and tool sales
• Service sales (training and support)