ARM Profit Craters

[Arachnotronic]

I will be completely upfront - I hate ARM hyperbole with a passion, and so it is with GREAT pleasure that I point out to the folks who were saying how "screwed" Intel was for reporting a 29% Y/Y profit drop (making "only $2B) that ARM's profits just took a complete nose-dive:

See that IFRS "profit before tax" line? ARM's profit before tax under IFRS (that is, they can't sweep share based compensation under the rug) is now LESS THAN A THIRD of what it was a year ago. The company made a whopping $23M this quarter *before* tax.

Guess that's what happens when you actually need to increase your R&D and marketing costs and try to hide it by paying everybody in overpriced stock to play in the big leagues, eh?

Locked per OP's request, and the title is misleading
Markfw900
Anandtech Moderator

 

[SOFTengCOMPelec]

They got hit by a huge patent bill. Otherwise, I think they are just fine.

Unexpected £41.8 mil bill

The only hint of negativity in the earnings report was a huge expense of £41.8 million incurred by a patent attack from an unnamed "third party", which was probably MIPS (see More Coverage), and which contributed to a much lower IFRS profit of £15 million -- although this represents ARM's contribution to a "full and final settlement", which presumably means it's a one-off thing

 

[gorobei]

[arm architecture and business model vs intel architecture] ≠ [(qualcom + samsung + apple)*(tsmc + samsung fabs) vs (intel fabs and marketing)]

 

[ShintaiDK]

[arm architecture and business model vs intel architecture] ≠ [(qualcom + samsung + apple)*(tsmc + samsung fabs) vs (intel fabs and marketing)]

Samsung and Apple would ditch ARM in a heartbeat if an Intel CPU had an overall advantage. And right now it doesnt look good for Samsungs foundries. R&D wise they are also far from being able to compete.

 

[StrangerGuy]

Samsung and Apple would ditch ARM in a heartbeat if an Intel CPU had an overall advantage. And right now it doesnt look good for Samsungs foundries.

ARM haters are so cute and out of reality

 

[ShintaiDK]

ARM haters are so cute and out of reality

Apple and Samsung doesnt make money on selling ARM chips. They make money on selling smartphones and tablets. ARM is only a tiny part of it. And neither Apple or Samsung would allow ARM to be in the way of the success of their devices. They have zero loyalty to ARM. Samsung dont even have any loyalty to its own ARM CPUs and happily uses STM, Qualcomm and others.

 

[monstercameron]

Apple and Samsung doesnt make money on selling ARM chips. They make money on selling smartphones and tablets. ARM is only a tiny part of it. And neither Apple or Samsung would allow ARM to be in the way of the success of their devices. They have zero loyalty to ARM. Samsung dont even have any loyalty to its own ARM CPUs and happily uses STM, Qualcomm and others.

maybe apple who don't sell their chips outside of the company but I am sure components maker samsung makes profit from it.

 

[SOFTengCOMPelec]

Samsung and Apple would ditch ARM in a heartbeat if an Intel CPU had an overall advantage. And right now it doesnt look good for Samsungs foundries. R&D wise they are also far from being able to compete.

I'm sorry, but NO.

One of the main "TRUMP" cards Intel holds, is X86.

But X86 is not much of an advantage (if any), for the massive hand-held/mobile/small devices markets, and to an extent, bigger stuff (but smaller than a desktop).

"Arm" designs have many advantages, which Intel simply DO NOT offer.

E.g. Flexibility for each manufacturer to customize part of the SoC, even if it involves looking at detail at the processor design, and optimizing/improving/altering it.

Do Intel let customers have the exact cpu design plans, and modify them to their hearts desire ?

The "Arm" customers (businesses/manufacturers of Arm products) have done so for a long time (measured in years). Things like this DO NOT change overnight.
E.g. Google Android usually runs on Arm chips, and most phones are Arm based already.

There are other benefits, I have not detailed here, such as Intel is not necessarily the most popular company out there, as regards OEM's, with their inflexibility and relatively high prices.

 

[ShintaiDK]

maybe apple who don't sell their chips outside of the company but I am sure components maker samsung makes profit from it.

The question was, do you want to sell an ARM chip for 20-40$ with a 50% margin? Or do you want to sell a 300-600$ smartphone/tablet with a 50% margin? Neither Apple or Samsung will let the first one be a hinderance for the second.

 

[StrangerGuy]

Apple and Samsung doesnt make money on selling ARM chips. They make money on selling smartphones and tablets. ARM is only a tiny part of it. And neither Apple or Samsung would allow ARM to be in the way of the success of their devices. They have zero loyalty to ARM. Samsung dont even have any loyalty to its own ARM CPUs and happily uses STM, Qualcomm and others.

So Samsung and Apple should just dump ARM to become slaves to Intel solely because Intel has a better mobile chip.

Brillant! Both of them will be contacting you shortly for a top CXO position for your excellent business talents.

 

[ShintaiDK]

I'm sorry, but NO.

One of the main "TRUMP" cards Intel holds, is X86.

But X86 is not much of an advantage (if any), for the massive hand-held/mobile/small devices markets, and to an extent, bigger stuff (but smaller than a desktop).

"Arm" designs have many advantages, which Intel simply DO NOT offer.

E.g. Flexibility for each manufacturer to customize part of the SoC, even if it involves looking at detail at the processor design, and optimizing/improving/altering it.

Do Intel let customers have the exact cpu design plans, and modify them to their hearts desire ?

The "Arm" customers (businesses/manufacturers of Arm products) have done so for a long time (measured in years). Things like this DO NOT change overnight.
E.g. Google Android usually runs on Arm chips, and most phones are Arm based already.

There are other benefits, I have not detailed here, such as Intel is not necessarily the most popular company out there, as regards OEM's, with their inflexibility and relatively high prices.

ARM doesnt have much flexibility for the device makers. And the performance/watt is eroding extremely fast. Specially when Silvermont hits tablets.

Android already runs on x86. And there has been x86 Android tablets and smartphones out there for quite a while. Not to mention Samsung is working on replacign Android with Tizen.

And Apple, we already seen them change before.

 

[ShintaiDK]

So Samsung and Apple should just dump ARM to become slaves to Intel solely because Intel has a better mobile chip.

Brillant! Both of them will be contacting you shortly for a top CXO position for your excellent business talents.

By your logic, Apple should still use PowerPC. Funny how Apples Mac success actually relies on using x86...

 

[SOFTengCOMPelec]

ARM doesnt have much flexibility for the device makers. And the performance/watt is eroding extremely fast. Specially when Silvermont hits tablets.

Android already runs on x86. And there has been x86 Android tablets and smartphones out there for quite a while. Not to mention Samsung is working on replacign Android with Tizen.

And Apple, we already seen them change before.

You are specifically talking about mainly ONE of Arms marketing outlets, tablets. But Arm processors, are on an extremely diverse range of products, from tiny microcontrollers in all sorts of things, up to much larger items.
Yes, there is some X86 on all sorts of things, but so far, except Desktops/laptops/(some of the)tablet market, it has been a relatively minor player, as regards market share.

I'm saying MOST of android is Arm, AND Most (or more) phones are Arm as well.
Power consumption is just one of many evaluation parameters, Arm do well power consumption wise anyway.

ARM doesnt have much flexibility for the device makers.

Do you have a reference source for that piece of information ?

Arm are way more flexible than Intel, and are highly customizable.

 

[sontin]

And he is only talking about the CPU part. ARM SoCs are not CPUs they are a "System on a Chip". Why would anybody chose BayTrail when nearly every other ARM SoC in the same categorie offers 2x the graphics performance?

 

[ShintaiDK]

You are specifically talking about mainly ONE of Arms marketing outlets, tablets. But Arm processors, are on an extremely diverse range of products, from tiny microcontrollers in all sorts of things, up to much larger items.
Yes, there is some X86 on all sorts of things, but so far, except Desktops/laptops/(some of the)tablet market, it has been a relatively minor player, as regards market share.

I'm saying MOST of android is Arm, AND Most (or more) phones are Arm as well.
Power consumption is just one of many evaluation parameters, Arm do well power consumption wise anyway.

But you are not gonna use ARM in smartphones and tablets. If x86 offers something better that gives you an edge over the competition. Or simply to keep up with the competition. Same reason why Apple dumped PowerPC. And Apple is not gonna risk their 50%+ margin on the latest 31.2million iphones sold. Simply to please someones obscure dreams about ARM.

Samsung already dicthed Apple as a foundry customer, due to their smartphone and tablet division. It was done with the blink of an eye due to the profit margins in the device segment vs the components and foundry.

 

[sontin]

Samsung uses their own ARM SoCs for their high-end tablet series - Note 3.
They are using Intel's CloverTrail for the "garbage" section of their tablet line.

 

[SOFTengCOMPelec]

But you are not gonna use ARM in smartphones and tablets. If x86 offers something better that gives you an edge over the competition. Or simply to keep up with the competition. Same reason why Apple dumped PowerPC.

How can X86 be better, if the customization/flexibility is needed for the product.

E.g. BOTH Microsoft and Sony, using AMD rather than Intel (for future consoles), is rumoured to be partly because AMD were more flexible with semi-customization.

Samsung already dicthed Apple as a foundry customer, due to their smartphone and tablet division. It was done with the blink of an eye due to the profit margins in the device segment vs the components and foundry.

I thought it was the OTHER way round, Apple dumped Samsung, and went with other suppliers.

 

[USER8000]

They got hit by a huge patent bill. Otherwise, I think they are just fine.

Unexpected £41.8 mil bill

It seems so.

This UK chip designer is accustomed to steep growth in demand for its Cortex mobile processors, and although we've seen hints that it faces new challenges ahead, for now it's mostly all gravy. Revenue in Q2 2013 soared 26 percent year-over-year to £171.2 million ($264.3 million), while profit before tax was up 30 percent £86.6 million (in "normalised" terms). Mobile devices remain the largest market for the company, but embedded devices (including wearables, Raspberry Pi and printers) is the fastest growing segment, expanding by 25 percent in the last year. The future continues to look rosy for ARM, with new Samsung Exynos 5 chipsets arriving based on ARM's Cortex-A15 and Cortex-A7 cores in big.LITTLE configurations.
The only hint of negativity in the earnings report was a huge expense of £41.8 million incurred by a patent attack from an unnamed "third party", which was probably MIPS (see More Coverage), and which contributed to a much lower IFRS profit of £15 million -- although this represents ARM's contribution to a "full and final settlement", which presumably means it's a one-off thing.

So,that means the actual profit after tax was £66.8 million,or £12 million more than the same period a year ago or nearly a 22% profit increase.

The OP is mistaken in their assumptions and should really change their post in light of the new information.

Pre-tax profits were up above 30% over the same period last year from £86.6 million from £66.5 million.

 

[StrangerGuy]

By your logic, Apple should still use PowerPC. Funny how Apples Mac success actually relies on using x86...

Because being an ARM licensee with their their own totally self-designed architecture is obviously the same as buying chips from IBM and Intel.

Eh, you might want to think things a bit more clearly before posting.

 

[ShintaiDK]

How can X86 be better, if the customization/flexibility is needed for the product.

E.g. BOTH Microsoft and Sony, using AMD rather than Intel (for future consoles), is rumoured to be partly because AMD were more flexible with semi-customization.

What flexibility and customization are you talking about? Unless you make your own SoC. Then you buy of the shelves components.

Consoles was purely about price first and a company willing enough to go low enough. Just see how nerfed the Xbox one is.

I thought it was the OTHER way round, Apple dumped Samsung, and went with other suppliers.

It was just Apple that officially pulled the plug. But it was Samsungs legal division and their tablet and smartphone division that made sure Apple only had 1 choice.

 

[ShintaiDK]

Because being an ARM licensee with their their own totally self-designed architecture is obviously the same as buying chips from IBM and Intel.

Eh, you might want to think things a bit more clearly before posting.

So Apple would stick with ARM, even if it was inferiour and losing sales to the competition due to that decision? :awe:

 

[SOFTengCOMPelec]

What flexibility and customization are you talking about? Unless you make your own SoC. Then you buy of the shelves components.

But those off the shelf components (Intellectual property, VHDL designs etc) can be put into the same Arm/SoC chip, which is usually cheaper/better than having lots of separate parts. But can't with Intels "fixed" chips/SoC. They are free to customise it as well.

Consoles was purely about price first and a company willing enough to go low enough. Just see how nerfed the Xbox one is.

Not just about price, sorry.

Best price, which does WHAT THE CONSOLE NEEDS.
Something cheaper, which does not fulfill the requirements for a console, will usually be rejected.

It was just Apple that officially pulled the plug. But it was Samsungs legal division and their tablet and smartphone division that made sure Apple only had 1 choice.

They had a kind of "WAR" between the companies (my opinion), which unfortunately, eventually got out of hand, and to the point that the companies had to sever ALL ties. It's sad when that happens (in my opinion).

But anyway, your original post, was trying to say that Samsung pulled the plug on Apple, which is NOT the case, at least officially.

 

[StrangerGuy]

So Apple would stick with ARM, even if it was inferiour and losing sales to the competition due to that decision? :awe:

Well, obviously Apple customers cares soooooooooo much about their "outdated" dual-core chips built on "lousy" 32/28nm processes inside their iDevices.

Just admit you are an Intel fanboy already, give it up.

This gets you an infraction
Markfw900
Anandtech Moderator

 

[Arachnotronic]

It seems so.

So,that means the actual profit after tax was £66.8 million,or £12 million more than the same period a year ago or nearly a 22% profit increase.

The OP is mistaken in their assumptions and should really change their post in light of the new information.

Pre-tax profits were up above 30% over the same period last year from £86.6 million from £66.5 million.

My mistake.

It may be appropriate for a mod to lock/delete this thread.

 

[ShintaiDK]

But those off the shelf components (Intellectual property, VHDL designs etc) can be put into the same Arm/SoC chip, which is usually cheaper/better than having lots of separate parts. But can't with Intels "fixed" chips/SoC. They are free to customise it as well.

You buy a fixed SoC from Qualcomm, Samsung, STM etc. You dont customize anything. And even Samsung buys its majority of SoCs from other companies. We got 3 Samsung devices here at home with ARM chips in them. TV and 2 phones. And none of them contain a Samsung SoC.

Now ask yourself why. And then you know why Apple, Samsung and others would ditch ARM in a heartbeat if there was something better.

Not just about price, sorry.

Best price, which does WHAT THE CONSOLE NEEDS.
Something cheaper, which does not fulfill the requirements for a console, will usually be rejected.

So MS simply nerfed their APU to hell because it wasnt related to price?

They had a kind of "WAR" between the companies (my opinion), which unfortunately, eventually got out of hand, and to the point that the companies had to sever ALL ties. It's sad when that happens (in my opinion).

But anyway, your original post, was trying to say that Samsung pulled the plug on Apple, which is NOT the case, at least officially.

When your supplier also makes devices and spy on your technology before release. Then it can only go wrong. Apple signed a 3 year contract with TSMC. Meaning Samsung essentially is out for good.