ARM Holdings by USFMuma

By Daniel Dorman, Julio Escalona and Aaron Mederos

Buy Recommendation $53

Price

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

2018 Target

$93

$68

Value

Cap.

$25bln

Beta

1.2

The Business ARM designs and licenses low-power microprocessors predominantly for use in mobile devices such as phones. ARM does not manufacture its chip technology but merely develops and licenses it. The company has been able to able to build significant market share, with around 95% of all mobile phones currently using ARM cores. A total of 12 billion ARM processor-based devices were shipped in 2014.

Performance

Key Numbers 2014

2018

$1.15

$1.85

95.5%

96%

Operating

50%

55%

Net Income

42%

46%

R&D

21%

PE TTM EPS

Margins Gross

1 yr Beginning March 16, 2015

S&P 500

ARMH

15%

-5%

-15%

Growth Sales

16%

12%

EBIT

18%

14%

-25% Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Thesis  Increasing smartphone shipments and increasing smartphone share within all phones shipped will drive royalty growth  Increasingly complex chips within each device increases royalties per device  Increasing penetration of newest technology within all segments raises royalties per device  Increasing market share within enterprise and embedded computing increases licensing and royalty revenue  Total addressable market growth, through the Internet of Things, will increase both licensing and royalty revenue

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

The Business ARM designs and licenses its microprocessor designs which are in turn produced by licensees for a variety of end uses that can be broadly classified into three categories: mobile, embedded, and enterprise infrastructure.

Mobile ARM’s technology is found on 95% mobile devices around the globe. ARM’s energy efficient Cortex CPUs and Mali GPUs are presently used in elite products from manufactures like Samsung, Apple, HP, Microsoft, HTC, LG, Motorola, Lenovo, Alcatel, and Huawei, just to mention a few. From smartphones and phablets to high definition tablets, ARM technology is favored by virtually all OEMs.

Embedded

Customers

Vehicles Partners like NVIDIA use ARM technology to power infotainment systems, instrument cluster, and rear seat entertainment (RSE) systems for more than 35 car models. End customers include Tesla, Volkswagen Group, Fiat Chrysler, and BMW among others. Ford infotainment systems also use ARM CPUs.

Wearables ARM products are currently in devices that part of the Internet of Things revolution. ARM Cortex-M series have become the customary technology used in smartwatches. Products include the Apple Watch, Pebble, LG ‘G’ and Samsung Gear Live and fitness products like Fitbit.

Tesla

Home ARM technology is used throughout a variety of household electronics. Partners like Samsung, Sony, Vizio, and Rocketfish use ARM IP. Companies like Leapfrog, Nintendo, Microsoft, and Sony manufacture products based on ARM architecture. Nest’s revolutionary thermostats use an ARM Cortex chip. ARM designed chips can also be found in

Apple Watch

Intelligent City Various municipalities throughout Germany, the United Kingdom, and the United States use ARM designs to collect and distribute real-time data about parking spaces both on the street and in garages allowing cities to reduce traffic congestion or control parking prices.

Nest Thermostat

Industrial & Other ARM’s products are used throughout industry with end uses in 2 robots, machinery, and medical devices.

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

The Business Enterprise Infrastructure ARM architecture is also used in enterprise products like routers, ethernet switches, printers, and video conference terminals, among others. Honeywell, Konica, Keda Communications, Fuji, Aperto Networks, Philips, and Thinklinx Inc. are some of the partners that use ARM’s power efficient technology on their products.

Catalysts Increasing Royalties and Operational Leverage Royalty Growth

Greater Smartphone Share Boost Royalties

Mobile device royalties are set to grow dramatically through three different avenues:

This growth works to increase royalty revenue in two ways. First revenue will track the broader growth trend in mobile devices, as ARM products are found across all mobile devices types. Second, as smartphones take a greater portion of mobile device shipments, royalties per device will grow significantly. Based on ARM data, an entry-level smartphone generates five times more royalties than a feature phone, while a highend device earns the company twenty times feature phone royalties.

80% 2.0 70%

1.5

60%

50% 1.0 40% 0.5 30%

0.0

20%

2011 2012 2013 2014 2015 2016 2017 2018

More Chips in More Advanced Phones

Smartphones are increasingly using more ARM designs per each chip. Put more simply, what was at one point two or more chips are being combined into one chip. This consolidation coupled with a steady or slightly increasing chip count per device translates to more royalties per device.

The following graphic illustrates managements expectations on royalty increases when chips are consolidated. The realization of such an outcome would outpace our base case assumptions on royalties.

Percentage of Unit Sales

Smartphone

Smartphone Share

The number of smartphones, based on IDC estimates, is expected to grow at an annual rate of roughly 10% from 2014 to 2018. Additionally, the percentage of smartphones within all mobile phones is expected to grow roughly 6% each year from 2014 to 2018, reaching almost 80% of all mobile phones shipped by 2018.

Unit Sales (Billions)

Feature Phone

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Catalysts Royalty Growth From public operating metrics, we deduce an approximation of Royalties per unit within each segment (mobile, home, enterprise, embedded). Our analysis of end markets and ARM’s strategy inform our mix and volume estimates from which we model royalty sales growth.

Market Research

We expect the shift in adoption rates to increase royalties per mobile device shipped. We also expect the continued royalty mix shift combined with above factors to slightly increased the average royalty per unit ARM will receive in the future. In addition to ARM’s processor designs, which dominate the industry, ARM’s Mali graphics processor has seen significant market share gains. This propelled ARM to the number one spot in mobile graphics IP vendors. The Mali architecture is featured in slightly more than 50% of smartphones present at Mobile World Congress 2015. Many manufacturers use Mali only in part of their product line. As these manufactures progress through their product cycle, other mobile graphics products will be replaced with Mali to standardize the product line and reduce costs.

Mobile LHS Home LHS Royalty per Unit RHS

Enterprise LHS Embedded LHS Royalty Units RHS

$0.10

$0.09

$0.08

$0.07

$0.06 13

Billions

ARM has seen a significant increase in the adoption of its newest technologies, which carry the highest royalty rates. When ARM released its v7 (previous generation) technology, adoption was initially restricted to high-end devices and trickled down the entry-level slowly. Their new technology, v8, has already gained a significant presence, appearing in 20 of the 33 major smartphones announced or released at Mobile World Congress 2015.

Royalty Projections

$0.05 12 $0.04 11

$0.03 $0.02

$0.01

$0.00

8 2014

2015

2016

2017

2018

Mix Projection

2014 34% 45%

16%

Embedded Mobile

ARMs embedded computing products which serve a variety of end markets, ranging from digital signage, to household appliances to driver assistance systems. The vastness of end market applications is reflected in the more than 3,500 microcontroller units ARM’s customers offer. This huge portfolio offers customers almost any configuration necessary to meet their specification. Between ARM’s expertise and the breath of solutions based off their architecture, ARM was able to gain an additional 5% of the embedded computing market, growing from 19% in 2013 to 24% in 2014. We expect Embedded to make up 45% of Royalty unit mix by 2018.

Enterprise

Home

Embedded

33%

2018

45%

16% 8%

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Catalysts Growing Market Share

Margin Expansion

ARM’s presence in enterprise infrastructure continually exceeds company expectations, and now reaches approximately 10% market share. Of importance is the fact that these products were all based off of v7. As enterprise solutions create products based off the v8 architecture, ARM will not only see replacement sales, but with v8’s superior power consumption and increased computing power will increase substantially, leading to further market share increases. Enterprise Infrastructure market share is expected to reach 20% by 2020

Increases in Addressable Market ARM is positioned to capitalize on the promising potential and growth in sensors and computing demanded from the proliferation of internet connectivity. Now commonly referred to as the Internet of Things, much of this growth market falls in ARM’s embedded segment. Another aspect of the scalability of this connectivity is the use of wearables. ARM can already be found in a slew of wearables, ranging from Samsung smartwatches to the Apple Watch to Google Glass. ARM’s products are also prevalent in other tech products including GoPro products, Nest Learning Thermostat, Drop Cam, and Smart Locks. Aside from household and personal items, ARM products can be found in automobiles, ranging from infotainment systems to advanced driver assistance systems. As the above list indicates, ARM already has a substantial foothold in the IoT space and this position will only continue to grow.

We expect margin expansion as revenues increase against the backdrop of relatively fixed operating costs, revenue mix changes, and licensing growth continues.

A disproportionate amount of cost of sales come from physical IP segment, which will grow slower than other revenue segments, putting upward pressure on gross margins. Furthermore, management states that R&D expenses our paid back after 12 licensing deals per offering. This payback will drive operating margins as 163 licensing were sold last year alone. However, the timing is somewhat unpredictable, which guides our projections to the conservative side (Financials appendix).

International Wealth As standards of living rise globally, demand will increase for more advanced mobile computing and IoT devices. The potential for greater than expected growth In living standards abroad as a result of market favored reforms will only further support the bull case for ARM and drive market beating numbers.

Geographic Breakdown Gross Margin LHS

Operating Margin rhs

98%

60%

96%

50%

North America Asia Pacific, ex. Japan

Europe Japan

93%

40% Asia 50%

43%

41%

91%

30% 7%

88%

20%

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Competition Other Competitors/become collaborator

Other Partnerships

Competing companies could be also some of ARM’s semiconductors partners. For example, Synopsys (SNPS) is a company that provides electronic design automation (EDA), semiconductor IP, as well as software and services. Synopsys designs components that serve the same purpose as those created by ARM. In September, 2014 the two companies signed a multiyear agreement that allows Synopsys pre production access to a large portion of ARM’s intellectual property like the latest ARM Cortex processors for ARMv8-A and ARMv7-A architectures, ARM Mali graphics processors, ARM CoreLink system IP, ARM Artisan physical IP, and ARM POP IP. The two companies have collaborated for over twenty years. We think that partnerships like this mitigate competition risk for ARM as their competitors become collaborators; this allows ARM intellectual property to have a wider reach while customers can step up their merchandise development cycles and benefit from leading processes and IP. It also demonstrates that ARM technology is favored by partners and competitors and has become the industry leading.

In October 2014, ARM announced a partnership that will optimize ARMv8-A processor IP for Taiwan Semiconductor Manufacturing Company (TSMC) 10FinFET process technology. TSMC is the company that replaced Samsung in manufacturing Apple iPhone 6 and 6 plus A8 chip that is uses ARM 64-bit architecture. ARM and TSMC have collaborated on 20SoC and 16FinFET before and decided to collaborate again for 10FinFET.

Macro Set-Up Based on several macro data points within our research venture’s reach, we find the industry and marcooutlook favorable for ARM, based on semiconductors volume, information technology investment, and favorable pricing trends. The graph to the right displays investment in information processing equipment, which generally uses ARM technology. As one can see, the one year average and Y/Y growth are both increasing.

Investment Accelerating Private fixed investment information processing equipment and software, SAAR, YoY 1 Yr Average

7% 6% 5% 4% 3% 2%

1% 0% Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Oct-14

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Macro Positive Pricing Power Trends The chart below is an inflation measure of electronic circuitry. It shows a recent end to unit price deflation in circuitry, indicating ARM’s end markets are some of the few not suffering from the current global deflationary pressures. After years of present downward pressure on pricing this market is finally stabilizing provide a potential impetus for higher margins.

Import (Harmonized System): Electronic integrated circuits and micro assemblies, NSA 2 1 0 -1 YoY %

-2 -3 -4 -5 -6 -7 Jan-10

Oct-10

Jul-11

Apr-12

Jan-13

Oct-13

Jul-14

Semiconductors Trending Higher Semiconductors Billings 3 MO Average 31

1 Year Average

2014

Millions

29 28 27 26 25 24

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Competitors Relevance of Intel

Beating Intel

The largest semiconductor company designs, manufactures and sells digital technology. Intel’s main segments are; PC Client Group, Data Center Group, while its Internet of Things Group, Mobile and Communications Group, Software and Services, and Other segments contribute minimally to revenue. Intel’s strength has been the computer microprocessor market as it has dominated this segment and displaced competitors like AMD and Texas Instruments. Intel has a moat in the desktop computer space where it has a large market share and its Core processors are ubiquitous in the personal computer space. However, ARM outperforms Intel in the smartphone and tablet market as Intel’s mobile segments loses money at an accelerating pace. Recently, Intel announced it intends to combine its mobile segment within its desktop segment. Are analysis of this event is that Intel is attempting to mask its money losing ventures into mobile by de-segmenting its operating metrics, as it continues to fail to adapt to the fastest growing markets in which ARM has a dominant stronghold.

Intel’s Mobile Struggles

Intel’s latest effort against ARM is the much announced Xeon processor. However, we see no immediate threat to ARM products coming from Intel. In the Mobile World Congress celebrated this month in Barcelona, we notice that the ARM v8 technology was used in 70% of the phones unveiled at the event; also, ARM Mali graphics were also used in 52% of the phones. All this points to a wide adoption of ARM technology among OEMs and supports our view on the company’s products technological advantage. We favor ARM as it is solely the designer for its technology, maintains focus on its engineering expertise, continues R&D investment, and does not incur productions costs while competitors like Intel are hit by production costs, and new product implementation costs. Qualcomm, Samsung, MediaTek, and Nvidia, are the main players in mobile System on Chip (SoC) manufacturing. Their combined market shares account for the vast majority of smartphone and tablet chips and their CPU hardware is based on ARM’s designed processors for which the company collects royalties and licensing fees. We think that ARM’s low power processors have this market cornered (in fact, gaining share) and could take years for Intel to keep up with ARM.

Intel’s Revenue Breakdown

Mobile and Communications Group Internet of Things Group Data Center Group

PC Client Group 0% 4% 4% 4%

Data Center Group

$6 $4

Internet of Things Group

26% 62%

$2 $(1)

Mobile and Communications Group Software and services operating segments

$(3)

All other

$(5)

2012

2013

2014

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Valuation Our free cash flow to equity model uses a pricing method for a 2018 terminal price of $93. Our target price is based on a trailing PE multiple of 50 times 2018 earnings. The average trailing multiple over the last five years is 77x. Based on ARM’s historic multiple, this assumption is reasonable and gives us greater cushion and conviction in our margin of safety, as we assume multiple contraction despite robust opportunities for growth as a result of the increasing proliferation of microprocessors. The reasons for ARM’s ostensibly high multiple include the following:  Unmatched margins, with business purely focused on engineering, not production  Fee based revenue model  Impressive growth prospects with proliferation of computing and more advanced computing technologies  Market leading positions in mobile and embedded markets  Leading innovation of low power consuming technology  Broad diverse applications for ARM architecture  Superior research and development track record and cumulative IP experience

Value Stock Price % to fair value

$68.29 $52.87 29%

Free Cash Flows to Equity Model 2014

2015

EPS Dep. Cap Ex NWC FCFE PV of FCFE

2016

1.32 0.14 -0.11 -0.08 1.26 1.15

2017

1.46 0.15 -0.13 0.04 1.52 1.26

1.63 0.16 -0.14 0.04 1.68 1.27

2018

Term Val

1.85 0.18 -0.16 0.00 1.87 64.62

Discount Rate Beta MRP 10Yr Yield

1.2 6.45%

CAPM

10.0%

2.24%

$93

Historic Multiples PE - LTM

Average

PE - NTM

Average 60

140

55 50

120

100

40 80

35 30

25 40 Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

20 Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Management Simon Segars – CEO Mr. Segars was selected as CEO in July 2013. He joined the company Board in 2005, and has served as EVP, Engineering; EVP, Worldwide Sales; EVP, Business Development; and EVP and General Manager of the Processor and Physical IP Divisions. Mr. Segars has been with the company over 24 years since the introduction of ARM’s early CPU products. He has worked in the development of many of the company products. Mr. Segars holds a Bachelor of Engineering from University of Sussex and a Master of Science from the School of Computer Science at the University of Manchester. He holds numerous patents in embedded CPU architectures. Tim Score – CFO Mr. Score has been with the company since 2002 in the role of CFO and director. He is a Qualified Chartered Accountant and carries years of experience in corporate finance. Prior to ARM, Mr. Score served as Finance Director of Rebus Group Limited from 1999 to 2001; from 1997 to 1999, he was Group Finance Director of William Baird PLC, which he joined from Group Controller for LucasVarity plc, where he worked from 1996 to 1997. From 1991 to 1995, Mr. Score served as Group Financial Controller for BTR PLC. Mike Muller – CTO Mr. Muller is a Co-founder at ARM and its Chief Technology Officer since 2000. He has served as ARM VP, Marketing from 1992 to 1996 and EVP, Business Development until from 1996 to 2000. Mr. Muller is also member of the company board since 2001. Prior to ARM, he was head of hardware strategy and portable products development at Acorn Computers. Graham Budd - COO Mr. Budd was selected to the position in 2008. He has served as EVP and General Manager of the Processor Division and has held numerous leadership roles on the organization. Mr. Budd joined ARM in 1992 as a design engineer; he has worked on the design of numerous ARM's early system-on-chip designs. He is a chartered engineer. 10

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Financials Appendix

ARM Income Statement

2011

2012

2013

2014 2015E 2016E

2017E 2018E

Processors

237

287

383

497

591

650

715

787

Physical IP

103

286

340

448

581

680

743

813

890

Processors

357

418

495

536

577

637

704

824

Physical IP

406

474

559

597

638

698

765

885

786

914

1,118

1,292

1,438

1,568

1,712

1,916

89.26

332.46

747

863

1,059

1,234

1,380

1,506

1,644

1,840

R&D

190

212

232

273

303

331

361

404

S&M

102

120

132

146

160

174

195

106

136

159

179

187

188

192

393

450

511

584

637

679

724

791

354

417

549

650

743

827

920

1,049

9.62

Pretax Income

73.43

374

443

580

657

743

825

917

1,043

Income Taxes

19.64

106

121

206

105

119

132

147

167

(1)

(6)

5 316

367

1 545

624

693

770

876

0.11

$0.55

$0.68

$0.78

$1.15

$1.32

$1.46

$1.63

$1.85

470.60

458.67

465.27

470.60

473.70

Technology Licensing

Total Technology Licensing Technology Royalty

Total Technology Royalty Software and Tools Services Total Revenue Cost of Sales Gross Income

G&A Expense Operating Costs

268.04

EBIT (Operating Income) Nonoperating Income - Net Interest Expense

Equity in Earnings of Affiliates Unusual Expenses Net Income EPS (diluted) Diluted Shares Outstanding

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Financials Appendix Growth Technology Licensing Processors Physical IP Total Technology Licensing Technology Royalty Processors Physical IP Total Technology Royalty Software and Tools Services

2010

2011

2012

2013

2014

2015E

2016E

30% 15% 27%

42% 19% 37%

21% 7% 19%

33% 24% 32%

30% 29% 30%

19% 5% 17%

10% 5% 9%

2017E 2018E

10% 5% 9%

40% 21% 37% 7% -18%

22% 11% 21% -5% 30%

17% 16% 17% 5% 7%

19% 13% 18% 4% 20%

8% -4% 7% 0% 6%

8% 0% 7% 1% 10%

10% 0% 9% 1% 10%

10% 0% 10% 1% 10%

17% 0% 16% 1% 10%

Total Revenue

26%

24%

16%

22% 15.6%

11%

12%

Gross Income R&D S&M G&A Expense

29% 16% 6% 13%

26% 2% 15% 20%

16% 12% 6% 28%

23% 9% 18% 17%

16% 18% 10% 13%

12% 11% 11% 4%

9% 9% 9% 1%

9% 9% 9% 0%

12% 12% 12% 2%

EBIT (Operating Income)

64%

39%

18%

32%

18%

14%

11%

14%

Margins Cost of Sales

5.70%

4.90%

5.50%

5.20%

4.48%

4.00%

Gross Income

94.3%

95.1%

94.5%

94.8%

95.5%

96.0%

R&D Expenditure

29%

24%

23%

21%

S&M Expenditure

13%

12%

11%

10%

G&A Expenditure

14%

15%

14%

13%

12%

11%

10%

Operating Costs

57%

50%

49%

46%

45%

44%

43%

42%

41%

Operating Income

40%

45%

46%

49%

50.3%

52%

53%

54%

55%

Pretax Income

42%

48%

52%

51%

52%

53%

54%

Income Taxes

22%

28%

27%

36%

16%

Net Income

31%

32%

35%

33%

42%

43%

44%

45%

46%

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Financials Appendix Balance Sheet Assets Cash

2011

2012

2013

2014 2015E 2016E 2017E 2018E

185

228

343

531

688

685

Short-Term Investments

397

554

641

828

1,048

889

758

702

Short-Term Receivables

210

242

417

260

288

282

291

326

Other Current Assets

204

Total Current Assets

738

1,079

1,292

1,358

1,725

1,752

1,792

1,775

Net Property, Plant & Equipment

Total Investments and Advances

172

263

238

340

359

376

394

422

Intangible Assets

862

1,008

1,004

Deferred Tax Assets

167

116

108

100

4 1,974

3 2,386

3 2,715

3 2,877

3 3,268

3 3,319

3 3,383

3 3,404

Accounts Payable

Income Tax Payable

228 287

338 380

405 464

332 406

283 359

319 397

369 449

412 494

3 35

2 39

0 75

13 71

325

426

542

494

448

485

538

583

1,649

1,961

2,172

2,383

1,649 1,974

1,961 2,386

2,172 2,714

2,383 2,877

2,383 437 2,820 3,268

2,383 451 2,834 3,319

2,383 462 2,845 3,383

2,383 438 2,821 3,404

Inventories

Long-Term Note Receivable

Other Assets Total Assets Liabilities & Shareholders' Equity ST Debt & Curr. Portion LT Debt

Other Current Liabilities Total Current Liabilities Long-Term Debt Deferred Tax Liabilities Other Liabilities Total Liabilities Common Equity Retained Earnings Total Equity Total Liabilities & Equity

Equity Research│March 17, 2015│NASDAQ: ARMH│ARM Holdings

Financials Appendix ARM Cash Flows

2010

2011

2012

2013

2014

2015E 2016E 2017E 2018E

Cash Flow Operating Activities Net Income / Starting Line

197

252

316

367

545

624

693

770

876

164

Funds from Operations

233

299

360

575

681

767

842

925

1,041

Changes in Working Capital Net Operating Cash Flow

71 304

19 317

(128) 232

52 627

(74) 607

(79) 689

39 881

39 964

4 1,044

Depreciation, Depletion & Amortization Other Funds

Investing Activities Capital Expenditures

(11)

(21)

(41)

(71)

(49)

(54)

(60)

(67)

(78)

Net Assets from Acquisitions

(14)

(33)

(21)

Sale of Fixed Assets & Businesses

(17)

(13)

(11)

(5)

(6)

(7)

(241) (269)

(218) (266)

(122) (160)

(296) (411)

(236) (310)

(191) (250)

(209) (274)

(228) (301)

(255) (339)

(48)

(68)

(83)

(108)

(143)

(187)

(243)

(308)

(438)

(98)

(108)

(118)

(129)

(144)

(11)

(54)

(5) (75)

(7) (106)

(12) (253)

(14) (309)

(15) (375)

(16) (453)

(18) (600)

Exchange Rate Effect

(0)

(1)

(14)

(16)

(17)

(19)

Net Change in Cash

(4)

109

115

215

193

Purchase/Sale of Investments Other Funds Net Investing Cash Flow

Financing Activities Cash Dividends Paid Change in Capital Stock Issuance/Reduction of Debt, Net Net Financing Cash Flow

Equity Researchâ&#x201D;&#x201A;March 17, 2015â&#x201D;&#x201A;NASDAQ: ARMHâ&#x201D;&#x201A;ARM Holdings

Markets Appendix Embedded In-vehicle Infotainment ARM is investing with its partners to homogenize the basic software building blocks, to permit the car manufacturers and its supplier to focus on areas of value add and differentiation around the user interface. ARM is heading towards a future that incorporates simpler advanced user interfaces in the car and provides continuous access to content as a user transfers from their home, to the car and to the office.

Embedded Computer ARM defines "Embedded Computing" as equipment that carries out computing functionality, yet is provided as a "black box". This means preloaded applications, and no capability for the users of the equipment to add new hardware functionality or new applications. Applications include digital signage, ATM machines and factory automation. Unlike personal computers, these systems are have considerably higher levels of reliability, which places tighter demands on the system architect in terms of thermal considerations and temperature range of operation.

General Purpose MCUs Across a number of applications, there is an increased need for more performance, either due to increased algorithm complexity, integration of multiple, discrete MCU systems into a single entity or the inclusion of wireless/wired connectivity. The rapid growth of the 32-bit controller market, coupled with ARM efforts to standardize low level software libraries further accelerates the availability of software libraries optimized for use on the Cortex-M family of embedded processors, reducing the learning curve for new microcontroller developers and improving time to market for new devices.

Smart Cards Smart cards are perhaps the single largest application of embedded microcontrollers by volume. They are evolving from relatively simple single application chips to high capacity multi-application secure devices. The Mobile Segment is a key driver for new technology in the smart card market with the once humble SIM card becoming a true multi-application card. Since all GSM handsets carry SIM cards, it is a device primed for carrying: payment, ticketing, loyalty, physical access control and many more applications that require some level of offline secure functionality. Over-theair provisioning of new applications is driving the need for additional processing power and storage.

Smart Meter The spiraling costs of residential and enterprise energy requirements are forcing public utility companies across the world to be more efficient in the way they manage power. Utility companies are starting to deploy electronic metering systems that capture and transmit usage information with the long-term goal to empower and educate users as to the real-time cost and impact of using an appliance at a particular moment in time. 15