Arm Royalties Down, Revenues Up

Article By : Nitin Dahad

Arm quarterly revenues increase year-on-year, but royalties decline due to dampening smartphone demand.

The SoftBank Group said revenues for its microprocessor business Arm increased 9.7% year-on-year to $418 million for the quarter ended 30 June 2019, despite royalty revenue falling 8% due to dampening smartphone demand.

Arm Q1 2020 revenues

Arm Q1 2020 (quarter ending 30 June 2019) revenues
(Source: SoftBank Group)

The company said it sold 28 licenses during its first quarter, including two licenses for new technologies Arm has not yet announced. Nineteen of these licensees were for its Cortex-M processor family.

On royalties, Arm’s licensees reported shipments of 4.8 billion Arm-based chips for the three-month period ended March 31, 2019 (it reports previous quarter). This was down 12.7% year on year. SoftBank said the decline in royalties reflected the slowdown in smartphone sales growth combined with overall weakness in the semiconductor industry. However, it added in the medium to long term, overall growth of royalty revenue could increase as Arm gains share in growth markets such as networking, automotive, and Internet of things (IoT).

Arm royalties

Arm units shipped in quarter ending 31 March 2019
(Source: SoftBank Group)

It cited the likely impact of the continuing trade dispute. It said the risk from trade disputes and sanctions against specific companies (referring, no doubt, to Huawei) remain today and could continue for some time. Hence SoftBank said these factors could impact both license and software and service revenues, as semiconductor companies choose to delay licensing new processors; and royalty revenues, as OEMs sell fewer products or manage chip inventory levels more carefully.

Arm’s overall revenue growth was due to licensing revenue increasing 47.1% year on year. However, this was a little bit of an anomaly, due to the establishment of Arm China delaying licensing activity in the previous fiscal year.  In this context, license revenue in the first quarter was at a similar level to the license revenue in prior quarters and reflects the recent deterioration of global business conditions in the semiconductor industry.

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