Slide 1: Arm Limited Q1 2018 Roadshow Slides
Arm Limited Q1 2018 Roadshow Slides Arm Limited is a subsidiary of 1 v1 © Arm 2018
Slide 2: Technology trends that will redefine all industries
Technology trends that will redefine all industries Artificial Intelligence in Autonomous Augmented Hyperscale cloud every device machines reality and connectivity Security and Privacy 2 © Arm 2018
Slide 3: Arm defines the technology that will redefine all industries
Arm defines the technology that will redefine all industries Mobile and Networking Automotive Internet of Things Consumer and Servers and Robotics Artificial Intelligence in every device Autonomous machines Augmented reality Hyperscale cloud and connectivity 3 Security and Privac
Slide 4: Arm introduction
Arm introduction Global leader in technology licensing • R&D outsourcing for semiconductor companies Innovative business model • Upfront licence fee – flexible licensing models • Ongoing royalties on partner sales • Technology reused across multiple applications Long-term, secular growth markets >1,
Slide 5: Arm's business model
Arm’s business model Arm develops technology that is licensed to semiconductor companies Arm receives an upfront license fee and a royalty on every chip that contains its technology Business Development 1) Arm licenses 2) Partners develop technology to chips and ship chip Partners them to OEMs Techn
Slide 6: Arm's strategy
Arm’s strategy Maintain or gain share in long-term growth markets • From mobile phones to networking infrastructure and servers to embedded smart devices and automotive Increase value of Arm technology per smart device • Invest in developing more advanced processors with higher royalty rates • Physi
Slide 7: Arm's main growth markets
Arm’s main growth markets Mobile and Consumer Devices Networking & Servers Embedded Markets $77bn $41bn $85bn TAM 2026 TAM 2026 TAM 2026 Smartphones, tablets and laptops Base stations, routers, switches, and Automotive, white-goods, wearables, servers for cloud and data centres smart devices i
Slide 8: History of Arm
History of Arm Joint venture between Designed into first mobile Now all electronic devices can Acorn Computers and Apple phones and then smartphones use smart Arm technology 1990 1993 onwards Today 8 © Arm 2018
Slide 9: Smart devices contain many Arm processors
Smart devices contain many Arm processors Arm CPU Applications Processor chips can contain Touchscreen and Apps Processor Chip multiple Arm technologies Sensor Hub Arm v8-A processor for OS and apps Cortex-R controller for modem Cortex-M controllers for peripherals WiFi Arm Mali multimedia p
Slide 10: Arm-based chip shipments
Arm-based chip shipments 21.3bn 125bn 39% 20 17.7bn Arm-powered SoCs shipped (billions) 15 Arm-based chips shipped to date Market share in 2017 10 5 0 1991 Calendar Years 2017 10 © Arm 2018
Slide 11: Arm's opportunity continues to broaden
Arm's opportunity continues to broaden 100bn Semiconductor industry continues to grow: 90bn Total industry* 8% by volume, 3% by value over past five years Chips with processors** ARM shipments 80bn 70bn 60bn Proportion of chips with processors is increasing over the medium term: 65% in 2017 50bn 40b
Slide 12: From revenue to profits
From revenue to profits Over 95% of revenues earned in US dollars FY 2017 Revenues $m £m %revs Licensing 33% Royalties are a growing proportion 618 455 of revenues Royalty 1,087 819 60% Software and Services 126 94 7% Cost increase as Arm accelerates investment Total 1,831 1,368 100% in R&D for futu
Slide 13: Qtr. ending June 2018 – Financial summary
Qtr. ending June 2018 – Financial summary Revenues ($m) Q1 2017 Q1 2018 Growth Licensing can fluctuate quarter to quarter. Licensing In Q1, lower revenues are primarily due to 149 85 -43% contract delays as Arm China was established. Royalty 250 261 4% Software and Services 29 35 21% Royalty revenue
Slide 14: Q1 Licensing is below the normal range
Q1 Licensing: 16 is below the normal range Average Number of licenses signed in Q1 2018 Historic licensing = 20 is lower due to Arm China needing to 60 novate contracts from Arm Limited to Arm China. Q1 Q3 50 This has resulted in a delay to licenses Q2 Q3 Q3 being closed and we have not seen a Q3 re
Slide 15: Cumulative Licences
Licensing enables future royalties Arm signed 16 licences Q1 2018 Arm’s current royalty revenues are derived from licences signed many years ago Growing base yields royalty revenues over long period Significant Royalty Potential $600m from Recent Licences +16 1500 ~575 licences signed +141 $500m 199
Slide 16: Arm's expanding opportunity
Arm’s expanding opportunity 2017 2026 Market Share Market Value Market Value Mobile Applications $21bn processor 90% $32bn Other mobile chips $14bn 45% $30bn $18bn Infrastructure Networking $14bn 20% $19bn Servers $17bn ~1% $22bn Automotive $4bn IVI and ADAS 50% $20bn $15bn Other automotive chips 10
Slide 17: Arm's expanding opportunity
Arm’s expanding opportunity 2017 2026 Market Share Market Value Market Value Embedded Controller in 90% $7bn IoT Devices $30bn $24bn Microcontrollers/ 20% $17bn SIM Cards $21bn Other Consumer 40% $21bn Electronics Markets $27bn Other chips 40% $7bn $10bn Total Market All chips with 39% $130bn proces
Slide 18: Establishing Arm China JV in Fiscal Q1 2018
Establishing Arm China JV in Fiscal Q1 2018 Building a bigger business; built on strong foundations >150 Licensees 10bn Chips shipped by Chinese partners using Arm processor technology 95% Chinese designed SoC based on x140 Growth in volume shipment by Chinese partners 2006-2017 Arm China will be ab
Slide 19: Establishing Arm China JV in Fiscal Q1 2018
Establishing Arm China JV in Fiscal Q1 2018 Building a bigger business; built on strong foundations >150 Customers to novate from 341 Employees transferred Arm China JV establishment was initiated in early Q1 2018 and completed at the end Q1 to Arm China in Q1 Arm Limited to Arm China Novation (tran
Slide 20: Arm's opportunity in mobile and consumer
Arm’s growth opportunity Arm’s opportunity in mobile and consumer Continued growth from advanced technology and new form factors Growth has been driven by Consumers pay a premium for Investment in smartphones advanced Arm technologies performance and features has led to new form factors Arm content
Slide 21: Arm's opportunity in automotive
Arm’s opportunity in automotive Functional safety, consolidation, partitioning, performance, power, cost Vision ADAS Infotainment Other modules Cortex-A55 + Cortex-R52 Cortex-A75 + Cortex-A55 V2X + Mali C71 + Mali G51 Chassis Heterogeneous multi-core Energy-aware scheduling Computer Vision Rich OS S
Slide 22: Arm's opportunity in servers
Arm’s growth opportunity Arm’s opportunity in servers Targeting 25% share (~1% share today) Arm processors are suitable for Arm v8-A selected for High Now shipping into enterprise >50% of data centre workloads Performance Computing applications Microsoft has ported the core components Barcelona Supe
Slide 23: Arm's opportunity in networking
Arm’s opportunity in networking Targeting >50% share of chips in next-generation networks Future networks will be based Networking software is being Accelerating data comms on open source collaboration optimised for Arm-based chips from server to server OpenDataPlane project members Network Function
Slide 24: Arm's opportunity in IoT – silicon IP
Arm’s growth opportunity Arm’s opportunity in IoT – silicon IP The architecture of choice for IoT developers Cortex-M processors enable High-value tech is now available Every thing will be connected secure, low-cost IoT devices at consumer price points 1997 Annual production of IoT modules 200 bn I
Slide 25: Arm's opportunity in IoT – software and services
Arm’s opportunity in IoT – software and services Investing to create new revenue streams Arm forecasts a $1 trillion TAM for IoT technology Arm’s IoT platform is being integrated into in 2035 OEM lifetime management services Electronic components Assembly Distribution IT services Installation Financ
Slide 26: Artificial intelligence in every device
Artificial intelligence in every device Learning in the cloud, inference at the edge Mobile Automotive Robotics Drones Home, surveillance IoT & analytics VR/MR Shipping & logistics 26 © Arm 2018
Slide 27: Machine learning and computer vision
Machine learning and computer vision The key workloads for intelligent computers Widely-available software tools Optimise for performance, cost Stable algorithms can be give developers access to ML and programmability hardwired into accelerators Upper body Full body facing facing forward Head facing
Slide 28: Autonomous machines
Technology drivers Autonomous machines Advanced compute is moving to the physical domain Robots and autonomous cars The physical domain requires Vehicle electrification will will operate alongside people stringent safety standards force the pace of change Cortex-R for safety critical systems Resilie
Slide 29: Augmented reality
Augmented reality New experiences and new user interfaces Seamless interactions between A demanding roadmap for Driving innovation in displays, humans, machines and data mobile GPU performance 3D sensors and computer vision Augmented reality (AR) overlays digital Latency: <16ms information onto the
Slide 30: Hyperscale cloud and connectivity
Technology drivers Hyperscale cloud and connectivity Infrastructure for the information revolution Enterprise compute is moving Insatiable demand for data is Workloads will be shared across to the cloud driving new standards devices, base stations and servers Performance targets for 5G networks 10
Slide 31: Information security
Information security The fundamental component of all connected systems Secure systems are built on a Devices must be kept secure Good security is inexpensive to hardware root of trust with regular software updates implement and costly to crack non- trusted trusted Secure, scalable, efficient device
Slide 32: Arm's current business
Investment strategy Arm's current business Arm develops intellectual property (IP) blocks which are used in silicon chips Our partners combine Arm IP with their own IP to create complete chip designs We earn license fees when we deliver Arm IP to our partners and royalties when our partners ship chi
Slide 33: Generating profits and cash to be reinvested
Accelerating investment Investing to create to increase share gains new revenue streams Mbed Cloud SaaS business Early-stage investment but many years in research Securely connect and manage any device, using any communications technology, supporting any cloud platform Device Management: sec
Slide 34: Revenues, investments and profits
Investment strategy Revenues, investments and profits £1,600m 7,000 Until 2016 revenues grew faster £1,400m Revenue 6,000 than costs as Arm constrained Total Costs investment in R&D to enable £1,200m 5,000 increasing profits Adjusted EBITDA £1,000m Headcount For the current phase of 4,000 £800m inve
Slide 35: Investment philosophy
Investment philosophy Arm has over £1.4bn of net cash and no debt Increase in Q1 2018 is due to sale of Arm’s stake in the “Now is the time to be sowing, not harvesting” Arm China Joint Venture Rate of investment is discretionary and under $1,600m Arm's control $1,400m SoftBank has asked Arm to
Slide 36: Return on Investments – Arm v8-A case study
Investment strategy Return on Investments – Arm v8-A case study Arm incurs R&D costs many years before revenue starts Multiple processors in development Research into 64-bit computing First generation started in 2000 of processors Architecture development and Arm v8-A processor design Development st
Slide 37: Return on Investments – General case
Return on Investments – General case Arm incurs R&D costs many years before revenue starts New technology Research into announced Technology Recurring 64-bit computing delivery revenue started in 2000 starts First technology agreements New technology New technology development starts Initial develop
Slide 38: Investing in people, infrastructure to create new products
Investment strategy Investing in people, infrastructure to create new products Costs are higher in 2018 as Arm expands R&D capability Cost increases are expected to be consistent with increases in headcount £2m (£5m) £280m £8m £28m £247m Q1 2017 in10% increase headcount* Increased IT, facilities Bad
Slide 39: Arm Investor Relations Contact
Arm Investor Relations Contact Contact Title Contact +44 1223 400796 Ian Thornton Head of Investor Relations ian.thornton@arm.com More content available on Arm’s website: arm.com/ir SoftBank Group’s website: softbank.jp/en/corp/irinfo/ 39 © Arm 2018