Hello everyone, this is Haruyuki Tago, Edge Evangelist at HACARUS’ Tokyo R&D center.
In this series of articles, I will share some insights from my decades of experience in the semiconductor industry and I will comment on various AI industry-related topics from my unique perspective.
In today’s volume, I want to dive into the microprocessor industry of logic integrated circuits being used in cell phones, embedded devices, digital home appliances, and other businesses. Below, we will discuss the business of Arm, and then we will compare it with the newly emerging RISC-V architecture.
Where is Arm Being Used?
To begin, let’s look at Figures 1a and 1b to look at the appearance and internal structure of a smartphone product back in 2018. In smartphones, the semiconductor, called the Application Processor (AP) shown by a black block in Figure 1c, controls the entire smartphone. This includes the processing of baseband signals for voice and data communications. It also manages various applications like the web browser, e-mails, cameras, video playback, and more.
Moving on to Figure 1d, this package contains a silicon chip where various functional blocks (the CPU, DRAM I/F, GPU, etc.). These blocks are integrated as shown in Figure 1e. As a company, Arm has a large market share in the IP development and sales industry. Arm sells a variety of IPs, including CPUs, GPUs, and APUs (AI processing units). For this article, I will focus on Arm’s CPU, the flagship IP. In the performance literature released by Arm, the CPU is also referred to as the Processor Design (PD), but both terms have the same meaning.Analyzing Arm’s business model, we can look at figure 2. The major players in this model are (1) Arm, (2) semiconductor manufacturers (SemiCo Partner), and (3) semiconductor users (OEM Customers). In practice, Arm license IP schematics and other information (Arm terminology Technology) to the semiconductor manufacturers. In other words, Arm offers them the right to use Arm IP. In return, Arm receives revenue through this licensing. One example of a semiconductor manufacturer can be found in Figure 1c. Here we see MediaTek, a Taiwanese semiconductor manufacturer that develops semiconductor chips using both Arm IP and its own. An example of its branded semiconductors is the HELIO P60 which is sold to customers like OPPO, a Chinese smartphone manufacturer.
Although Arm IP is embedded in these semiconductor chips, the product brand belongs to the semiconductor manufacturer, not Arm itself. However, once the semiconductors are mass-produced, Arm is paid a per chip royalty based on the number of chips that are shipped. This model is similar to how an author receives royalties based on the number of books that are sold.
Arm – A Business with a Deep History
The overall business cycle for Arm is quite long. Looking at Figure 3, we can see that it takes a long time from IP R&D until sales are actually generated. This is the nature of Arm’s license fee and chip royalty business model. Taking a deeper look into this cycle, the research and development step takes approximately 2-3 years. During this period, the company is not generating any sales, and only expenses are incurred. After 3-4 years of product development revenues can be realized through licensing fees and chip royalties can begin once the products are shipped.
From the perspective of Arm, license revenue comes first when the semiconductor manufacturers start development. This is then followed by chip royalties after the mass production begins. To maximize its profits, Arm needs to continue increasing its licensing fees in order to increase its future chip royalties.
Arm Sales Figures
Figure 4 shows the annual sales of ARM from 2007 to 2021. Most likely due to a shortage of semiconductors, Arm saw a sharp increase in license sales during 2021. Stepping back a few years, in 2019 the technology licensing revenue was $58.3 billion USD, the total technology royalty revenue was $108.1 billion USD, and the combination of software & tools revenue and service revenue was $23.5 billion USD. Comparing these figures, licensing sales accounted for about 31% of total sales, while chip royalties accounted for about 57%.
The Arm Market’s Quarterly Shipment Trends
Looking back at the beginning of this article, we can see the graph showing the quarterly shipment trends for the Arm market. This graph starts in Q2 of 2007 and covers all the way to Q2 of 2016. It is interesting to note that the shipment numbers for mobile devices (the blue area) have had relatively low growth since 2017. On the other hand, the shipments for embedded devices have been steadily rising.
Quarterly Shipment Trends for the Arm Processor Design
Next, let’s take a look at the various processor designs implemented by Arm. Looking at Figure 5, we can see another graph showing the shipment trends from Q2 of 2007 until Q2 of 2016. Here we can see that the Classic series, including the ARM7, ARM9, and ARM11, still had a large shipment volume in Q2 of 2016 but it has been steadily decreasing since then. We can also see that the Classic series has been in production for a significantly longer period, debuting back in 1993~1994. A newer example is the Cortex-M, which has seen a steady increase in shipment orders over time.
Arm Flexible Access
In July of 2019, Arm introduced the Arm Flexible Access service . In essence, it is a post-payment method for Arm IP license fees. With the Arm standard IP license, fees had to be paid at the beginning of the design process, as shown in Figure 6 (upper blue arrows). With Arm Flexible Access, the IP license fee is paid at the time the design is completed and the manufacturing begins, which we can see in Figure 5 (the bottom blue arrow). During the selection, evaluation, experiment, and design periods (bottom side of figure 6), evaluations can be performed using various IPs from Arm’s processor IP repertoire. Customers can also select the IP that best meets their needs regarding performance and cost. One limitation is that only one processor IP can be taken through to production, but this shouldn’t be a problem for most customers.The Arm Flexible Access service has three options for licensing, as shown in Figure 7. The lowest tier, DesignStart, is free, but access is limited to low-end processor IP. The next tier is the Entry tier, which costs users $75,000 USD each year. With this tier, users have access to more than 80 Arm IP types, as shown in Figure 8.
The Rise of the RISC-V
RISC-V is an open standard instruction set architecture (ISA) based on established reduced instruction set computer (RISC) principles. Unlike the ISA designs, such as Arm, the RISC-V ISA is provided under an open-source license with no royalties. RISC-V International manages the instruction set architecture which is considered neutral and highly stable because it is not owned by a private company. Unlike when Arm, a company under the SoftBank Group umbrella, was almost sold to the U.S.-based semiconductor manufacturer, Nvidia, the industry is unlikely to be shaken by this development.
The RISC-V instruction set has a pre-defined extended instruction code space, allowing users to add instructions suitable for each application. The RISC-V IP and System on Chip (SoC) utilizing it are commercialized by various manufacturers such as the SiFive Corporation in the United States and the Andes Technology Corporation, which is based in Taiwan. When developing semiconductors using RISC-V IP, it is necessary to pay license fees and chip royalties to these manufacturers. At the same time, no payments are made to RISC-V International. In figure 9, we can see the current and forecasted software and tool sales of RISC-V IP based on a 2019 survey. We can also notice that the RISC-V IP sales are growing rapidly.Although the RISC-V camp has excellent CPU IP, there are some other IPs necessary for SoC development, and design tools are still in their infancy. Currently, the ecosystem that Arm has built over the years still has a significant advantage.
Comparing Arm License & RISC-V IP Sales
Drawing a comparison between the Arm Processor Design (PD) License sales and the RISC-V IP sales, we can look at Figure 6. Looking at the figure, RISC-V IP sales are estimated to have reached 23% of the Arm license sales by 2019. This suggests that RISC-V is rapidly being adopted within the logic semiconductor design field which includes CPU IPs.The introduction of the Arm Flexible Access system can be seen as Arm’s countermeasure to RISC-V as it continues to increase its market share in the semiconductor industry for embedded applications.
- Looking at the graphs above, Arm IP shipment numbers are shown for sales between Q2 of 2007 and Q2 of 2016. These statistics are based on the Arm processor design and show that the Classic ARM series (ARM&, ARM9, & ARM11) still has a large volume of shipments in 2Q of 2016. The classic series was introduced over 20 years ago and its sales are beginning to drop. However, the newer Cortex-M has been steadily increasing its shipments since its launch.
- In July of 2019, Arm introduced Arm Flexible Access, a postpaid Arm IP licensing service. The main purpose of this service is to lower the barrier of entry for customers. It also aims to increase the number of customer designs and encourage the use of more IP licenses. Furthermore, once semiconductors using the Cortex-M IP are available, chip royalty revenue will increase along with long-term production.
- As of 2019, RISC-V IP was estimated to be 23% of the Arm processor design license sales. It also appears that RISC-V adoption is rapidly growing in the field of new logic semiconductors which includes CPU IP. It will be interesting to see how the battle between Arm and RISC-V ends.
 “ARM Holdings plc Reports Results” for 2007/2Q ~ 2016/2Q
Example 1. 2007/2Q result
Example 2. 2016/2Q result
Search method: (1)Access https://www.design-reuse.com/ (2) enter keyword such as “ARM Holdings Report 2015”, etc., into SEARCH IP field.
 Arm results for 2017/3Q ~ 2021/4Q
SoftBank Group Corp., May 9, 2017 “Earning Results for the Fiscal Year Ended March 31, 2017, Data Sheet”
SoftBank Group Corp., May 9, 2018 “Earning Results for the Fiscal Year Ended March 31, 2018, Data Sheet”
SoftBank Group Corp., Data Sheet for the Fiscal Year Ended March 31, 2019
SoftBank Group Corp., Data Sheet for the Fiscal Year Ended March 31, 2020
SoftBank Group Corp., Data Sheet for the Fiscal Year Ended March 21, 2021
SoftBank Group Corp., Data Sheet for the Fiscal Year Ended March 21, 2022
 OPPO Japan R15 Neo Spec.
 清水洋治（テカナリエ）, EE Times Japan, 2018/7/19，MediaTekが「OPPO R15」に送り込んだ“スーパーミドルハイ”チップのすごさ
 Arm Limited Roadshow Slides Q2 2020
 Arm, Arm Flexible Access gives chip designers the freedom to experiment and test before they invest
 Arm, ARM FLEXIBLE ACCESS
 大原雄介， 2019/8/27，Armの“後払い”ライセンスに見え隠れするRISC-Vの興隆
 Ian Cutress, AnandTech, July 16, 2019, “Arm Flexible Access: Design the SoC Before Spending Money”
 Calista Redmond, RISC-V International, RISC-V Days Tokyo 2021 Autumn, 2021/11/18, page 12, “RISC-V The Open Era of Computing” https://riscv.or.jp/wp-content/uploads/Japan-RISC-V-Open-Era-11-11-2021_compressed.pdf