British design firm ARM Holdings is scheduled to report a big increase in royalty income thanks to the latest chipset designs its pumped out. ARM, who has been behind practically every chipset in every smartphone over the last decade, has made a name for itself by holding the license to the one and only ARM architecture. This architecture is synonymous with mobile products the way x86 architecture is synonymous to the PC and Mac worlds and has become the forefront for innovation and quality in the mobile world. ARM’s latest chipset design, the 8th generation Cortex-A processor, is behind the design in every major upcoming smartphone outside of Asus’ latest Zenphone series. This includes the likes of the HTC One M9, Samsung Galaxy S6 and even Apple’s recently released iPhone 6 and 6 Plus.
ARM’s architecture is used by MediaTek, Qualcomm and even Samsung in their own chipsets, and while all these manufacturers make plenty of customizations to the architecture the heart of every chipset is inherently designed by ARM, and thanks to that fact we’re looking at a serious uptick in the stock price of ARM Holdings for the past quarter. Quarter 4 2014, saw a massive 3.5 billion ARM-licensed chipsets produced and subsequently placed in phones, boosting the company’s pretax profit to £118.9 million (about $181 million) which stands over the initial analysts’ estimates of £113 million (about $172 million). Those numbers come from a 19 percent increase in revenue that’s split between licensing and royalties totaling £225.9 million (about $344 million).
Part of this increase isn’t just due to the success of the phones that are powered by ARM’s designs but also because royalty rates have been increased by ARM. Previous generations of chips held a 1 to 1.5 percent royalty rate while the newest 8th-generation chips start at 2 percent. ARM expects somewhere around half of the phones shipped this year to be powered by the 8th-generation line of chipset designs, giving them a significant boost over previous years if nothing else changes. A total of 53 licensing deals were signed in Q4 2014, with eight of those being for the 8th-generation architecture design. ARM’s latest design, the Cortex-A72, is said to be three times more powerful than the previous generation chip all while using 75 percent less power. All this means the mobile industry is up for another record year of innovation and sales, and ARM is definitely here to benefit as it continues to be the heart of the industry.