Arm Holdings plc (ARM)

Analyst & Investor Day 2015

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Sep 15, 2015

Hi, ladies and gentlemen. There are more than just us involved in this. We need to cracker on, even there are a few still signing in as they come in. It's my great pleasure with the Chairman of Arm Holdings to welcome you all here for our Investor Day. I'd like to start by welcoming Chris Kennedy to the team. I've more familiar presented to you just joined us as our CFO on the 1st September, as I'm sure most of you know, but it's very much been getting involved before that. And coming up to speed and also meeting a lot of the people that are in development to Arnd and is very much in return. So today, we're going to be outlining increased investments in a number of areas, one of which building on established success with things which are going well, in the interest of accelerating program. And particularly three areas particularly off increased opportunities in mobile, accelerating our share gains in, in networking server. And also creating new revenue stream opportunities in implementing So and, of course, all of which then importantly leading to strengthening our returns. Lot to get through. And therefore, without any further delay, let me hand over to, and if you need no introduction, Simon who's going to kick Thanks, Stewart, and good morning, everyone. Thank you for joining us today. Before we start, let me just direct you to the usual customary statements about forward looking we might exit today, we're going to take that as RED, and then to the agenda. As Stuart said, what we're going to cover this morning is how we plan to grow this business. And we see many exciting opportunities ahead of us. And through this morning, gonna hear me talk to you about mobile, what's going on in mobile, why we view this as an exciting business, against the backdrop of a change in growth rates per unit. We still see this as an exciting business. Still see this as an area where there's going to be lots of innovation. I'm going to talk about some of the trends there. After me, Pete's going to be up, talking about what we've been doing in the enterprise infrastructure space. And by that, we mean and networking and servers, and what we're going to be doing to accelerate our market share gains in this very exciting area for us. After that, Mike, our CTO, is going to be talking to you about what's going on in the internet of being And this is a space we've spent a lot of time talking about, through our, presentations during results and that other, analyst days. So we're going to bring you up to speed with, again, what we've been doing, the opportunities that we see ahead of us an opportunity for us to grow revenue stream beyond the microprocessor within the microcontroller. So lots of, talk today about the end market. Of course, it only matters, whatever we do here, only matters as long as it does translate into money. And it is great to have Chris on board at last with us and to help translate all of this good effort that we're doing into pounds and tenants And so we'll be wrapping it all together with a finance view, of how this, this opportunity translates into money. Later on, we'll be doing a Q And A. We'll have Mike going around the room, and I'm sure there's lots of questions that you want to ask. So let's, let's make a start on the real content. And I'm going to talk about what we're doing holistically to address the long term growth opportunities that we see and then specifically talk a little bit about mobile. Now I'm just going to be twenty five years old this year, and our business has changed a lot over that time. When we started out, We knew that this concept of embedding intelligence into chips and into end devices was going to be a good idea. If I'm honest, we didn't really know where that was going to take off, but we could see that as an overall trend embedding a microprocessor into a chip surrounded by a whole load of other functionality by many semiconductor companies is going to lead to fascinating new consumer products and changed the way that computing was going to happen. So the technology that we had at the time where the company was formed was a very small, very power efficient and very powerful microprocessor. We set about building a licensing business, to make that a pervasive standard and build an ecosystem so that software can be written for that processor. We got our first real success for this technology in mobile as mobile phones became digital mobile phones and GSM and other digital standards took off. We were in a very fortunate position. We were at the right place at the right time we developed the right technology to enable a powerful 30 to bit microprocess effort to be put into a cell phone at very low top. And of course, the units of the golf and that helped grow our business. And as we grew, what we saw was that the companies that we worked with started using our technology in other markets. And that led us then to investing technologies to allow the ARM architecture to be used in much more powerful applications And also in much smaller applications, these tiny microcontrollers that we're going to find everywhere as the internet is being developed So we've grown up with the technology. We've grown down with the technology. And we're in a position now where as computing changes computing is becoming pervasive everywhere. Then we see an opportunity, but everywhere that that computing is happening, that's to happen utilizing technology. So that's the opportunity that we see ahead of us, and we are investing in our business to really take advantage of that. And we're going to talk today about what we're doing to address some of these markets, particularly. But before we look to the future, let's step backwards for a moment. I have to go back to 2004. Armed partners, our licensee shipped 1,300,000,000 chips, and we were pretty proud of that at the time. I can remember us celebrating actually in a pub not too far from here, there's a billions unit on an annualized basis. When we look at the breakdown of those units in 2004, and the vast majority of them were going into mobile phones as I said growth of digital cellular has taken off. In that year, there was about 700,000,000 phone shipped by various OEMs around the world, virtually, every one of them had an arm microprocessor in it, and that was a great thing. We were starting to see shipments though in other markets. Our licensees, which has success with ARM in mobile. We're starting to use ARM Processors to address other markets. And so we were starting to see unit growth outside of mobile. And as the chart shows here, you can see the breakdown of that in 2004, about 20% of the units being shipped at that time in what we classified as enterprise, and that was largely hard disk drive. 7% in the home, some TVs, home WiFi routes, that sort of thing, and about 5% were embedded. We were starting to see the first microcontrollers built using an ARM 7, which was a product we hadn't designed for microcontroller for microcontrollers. So all of these, these other uses for Ram were really being derived from products that we had designed for mobile. Now so that unit breakdown painted a picture of a company that was very mobile centric. And indeed, opportunity around mobile looks very exciting ahead of us, and we were doing a lot of work, making sure that we maintained our lead in the mobile space. But if you look at the licensing that was going on at the time, that paints quite a different view of the company. We're, of course, getting a lot of repeat business from our license team we were focused on mobile. So we were starting to see more and more companies coming to arms, seeing the benefits of the technology that we had and seeing opportunities to better microprocessor in shifts that we're targeting other markets. So we were starting to work with companies who were focused outside of mobile. And as you can see there, the breakdown of the licensing really shows a different view of what might happen in the future. Microcontroller at that time was a particularly interesting space for us. And in 2004, which is where this data is from, that is when we launched, the first, processor that we designed specifically for microcontroller cortex M3. And we see we saw a huge adoption of that that was driving the embedded side of the licensing. So the units were showing one picture, the licensing was showing another. And if we fast forward back to 2014, our last full year, will that change in the shift of licensing, change in our emphasis has resulted in its diversification of the shipment of product into various end markets. You can see here now that less than half the shifts being shipped by our licensees, are in mobile. We've seen big growth in embedded. And on a proportional basis, actually a reduction in home and in enterprise has been absolute term, and that's very different. We think about enterprise. Back then, as I said, that was largely disk drive. Now we're seeing the adoption of ARM Technology in base stations in switching, and Pete's going to talk about this later on. And last year, that 16% of our volume amounts to 2,000,000,000 chips. Obviously a lot more than the entirety of the ship being shipped in 2004. So the licensing, the diversification, the licensing has led to a diversification in the end market and growth rapid growth in volume of ARM Processors in mobile, but also outside mobile. When we look today, and how the licensing is going. When we look at the market, that customers are adopting our technology to go and address, There's still a lot of repeat business of an ongoing road map of technology for mobile, but we're seeing growing licensing in other markets. And again, when we think about the future, points to more units being shipped in markets outside of mobile. In 2004, we had about 100 and 40 licenses. We've now got over 400, and we're working with companies really targeting a vast array of end product in many different end markets. For this diversification, has come from investments that we've made in technology. What we've what we first started seeing was people take the things that we designed for mobile and start to use them in other markets. And as we achieved success in these other markets, we started to diversify our product lines so that we could have greater success in these end markets. And this is a philosophy that we've followed now for many years. The net result of that is that we now have a broad market penetration in many different end markets just beyond mobile. So the very high share, in smartphones in mobile devices that I'm sure you're all carrying around with you, over 95% market share, in smartphones. We've continued to gain share in some of those early markets that we were successful in our disk drives, for example, TVs have become digital TVs, and a vast majority of those are based on our own technology. And of course, microcontrollers have grown rapidly The Cortex AIM series has been very, very successful in the transition from 8 bit microcontrollers to much more powerful, the 2 bit microcontrollers. We've grown in the markets where we had that initial success, but we've also seen ARM become the technology of choice in new markets. Tablets have appeared as wearable devices have appeared. Our licensees are looking to target that space. We're looking at the technology that we have and seeing all the attributes of small die size, which equates to cost, very low power, great performance, as the key attributes that they need to address these emerging markets. So this has led to very broad market penetration but it's only happened because we've invested in the right technology, and I think over the last 25 years, we've invested in that right technology at the right time to capture the growing market opportunity. So that's what we've been doing and we're going to continue to address the future in this way. We're going to expand our product portfolio with the right processes for the right market, hitting that trade off between performance, power consumption, features, diasize, we're going to broaden our portfolio to make sure that we can address that market with the right technology. But it isn't just about processes. We're introducing new technology through organic investments, and we're complementing that with acquisitions that we're doing to bring the right technology and demand to complete the picture of what our customers need to go and address the market and, to generate new revenue streams for us. Now vitally, though, it isn't just about what we're doing, what our licensees are doing, we pride ourselves on a very broad ecosystem of partners. People, the companies that we work with, and there are thousands of them, who are building their own businesses, utilizing technology that we create, and in support of the ARM architecture. And so there's a very wide ecosystem of companies who are all doing work, building, trading profitable businesses in their own right, that really do amplify what we do and what we do amplify what they do. That ecosystem is really, really important, important for the markets that we're in, and it's really important for the markets that we're growing into. So this approach, the rights technology, supplementing it through our investment, building that ecosystem, has enabled a sustainable growth for Arm, over a very long period. We've been able to create a more valuable technology that's allowed us to generate more royalty on a per microprocessor business. We've been able to it's been able to integrate more technology that our customers are incorporating into each of their shifts. It's enabled our partnership to accelerate the gain of market share in these new markets, and it's pretty great at stickiness for our product. We want our our licensees, our partnerships used on penalty over and over. And so everything that we've been doing is creating this environment where it's an easy choice to use. All of that has led to it being able to create, increase the amount of royalty that we get on a per chip basis. It's enabled us to grow market share and it's enabled us to create new revenue streams from new technologies and new markets. So this philosophy has created sustainable growth for Arm. And I see this really continuing into the future. It's what we've done for many, many years now, and it's what we intend to continue doing. A lot of our engineering is focused on the roadmap of products that we have defined today. We work closely with our customers to identify their needs where the market is going. We take that information to drive our product road map and, and Pete's team, he'll be up later on, and then charged with executing on that road map, delivering the product. I also have a team of engineers who are kind of slightly outside of that day to day effort of delivery they're thinking about longer term where the technology goes. So under Mike Mueller, our CTO, we have an what we call our R and D team in equates to about 10% of our engineering headcount and now focused on kind of outside the main day to day thinking about the long term of technology and running experiments to see what things might we want to incorporate into our product portfolio, where we might want to build relationships, how we might want to work with universities. But looking outside just the heads down day to day work. But that effort has been really important for us. Over the years, it's created architectural features that we built into, our main processor roadmap that's enabled some of this market share gain that I've been talking about. It led to ultimately some of the in meds technology that Mike's going to be talking about later on. With our own R and D, we've complemented that with acquisitions. We brought in technologies, such as our display IP, another building block that many of our customers need to put inside their chip to allow a display containing graphics and videos to be put together and now onto a actually onto a screen. So that key technology came from an acquisition, we'll build that up, and we're now starting to see the benefits of that in licensing with royalties to come in the future. So long term R and D, acquisitions in a way that we have a delivered this growing technology portfolio. We've done some larger acquisitions. Our Physical IT business came from, in fact, the largest acquisition that we've done We're looking into the future and thinking about the complexities of building very advanced semiconductor devices, and it's clear that we're going to need to enable our licensees to get a more optimized solution in a more predictable and shorter time to market way that is how we've driven our physical IP business. So this combination of organic investment and acquisition has allowed us to grow. It's enabled us to create now a much larger range of product that we're out licensing. In the early days, back in 2004, is that beyond then, earlier than that? We had the ARM 7 processor We had some of the basic building blocks that are partners needed to put a chip together around that, and we've grown it we now have a very broad portfolio of technology driven by the needs of the end market. Where is the end market going? Whether our licensees need to put their chips together to complement their own R and D with technology that we can provide. So that's led to a very broad portfolio of technology that here are enabling some of the world's most sophisticated chips to be built. We had a few new processes every year. We've got some more coming, that we're going to be announcing the details of later on this year. And in 2014, when we look at how many different processes to be licensed with about 20. We've gone from the early days of a processor, another processor to portfolio now is about 20 different processes that we like to think, concurrently. So the product line evolution, though, isn't just about performance. Everybody wants more and more performance, lower and lower power. But as we've evolved this product portfolio and as we've thought about the needs of companies, other markets, It isn't just about performance. It's about having the right features. It's about making sure that the processes are as small as they can be, and it's about making sure that the system that our licenses are building around our processes are as efficient as they possibly can be. So we've, built our portfolio to address now a very wide range of markets, the breadth of technology that we have, enables many different end markets to be addressed. We've been able, technology for the embedded market, these microcontrollers, the real time applications. When you get the brakes on your car, you want it to stop and not think about it first, we have technology that helps make that a reality. And we've acquired technologies that help grow the overall offering that we have in any one market to help accelerate time to market for our license and generate revenue stream, recurring revenue streams from. A great example is the radio technology that we recently acquired from something called Sunrise Micro devices that complimented that with softwares that put the Bluetooth back together and can provide a much more complete solution now for somebody wanting to build a chip. Targeting IoT. So the breadth is as wide today as it ever has been. So we're going to continue in this way. We've seen many exciting opportunities ahead of us. And we're going to continue to invest in our core road map, and we're going to continue to look for opportunities to bring teams and the technologies in that we can grow. So we're going to grow organically, and we're going to continue to grow through acquisition, and crucially keep building that ecosystem. As we look at some of the new markets, there are players that we've never worked with before that we need to go and engage with. To create the complete software offering to enable some of these new markets to really be addressed, fully. And you'll hear about some of the details of how that ecosystem is expanding in the later presentations. So through this way then, through this philosophy that we have to investment, we see that we're going to continue to grow a sustainable business with growing revenue per chip and recurring revenue stream. Now a lot of the investments that we make is in our engineering headcount. Pete is where it's coming in the office, but I need to hire more people because of this opportunity that we have pretty big on you there. And we are investing in the headcount to grow the opportunity. When we look at the engineering headcount devoted to just mobile products. This has been going up and up over the last few years as the market has grown. So just in engineering, are bringing the company as a whole, the supporting infrastructure that we need to make the business efficient and effective is an area that we're investing in as well. So mobile remains a very important market for us. It's a major driver of our business. The products that we create we're able to morph into other markets as well. And as we've seen this opportunity grow outside of mobile, we're investing in engineering teams specifically to go and target that market. So in parallel with the headcount growth focused just on mobile, with growing the number of engineers who are working on products outside of mobile. And in fact, the number of people that we have working on We expect to grow by about a factor of 3, in comparison to where we were back in 2012. So in mobile, outside of mobile, we see a significant opportunity for growth. You're going to hear about what we're, the way we view the enterprise infrastructure market and IoT in detail later on. So for the time being, I just want to focus, for the next few slides on what's going on in mobile. As I said, mobile remains a very important market for us the proportion of the units that our licensing shift into mobile is still very, very high. The relative revenue from that are very, very high. That's important market, one which is in a phase of transition. So I want to spend a little bit of time talking about what's going on in the mobile market. What it means for our business, and how in a world where growth is slower, how we still see a great opportunity for growth, and an exciting opportunity to provide more and more value into mobile devices, which we're all carrying around are going to become even more sophisticated. So the first point I want to make is about the market size. Today, we have about an 85% market share of mobile devices. Now you may be thinking, I'm used to call this about 95% market share. What happened has it gone down? Has it gone down? What we've seen is as the capability of our product has expanded, there is an opportunity for us to target more than just masks. I mean, obviously, the tablet market grow And we're seeing the performance of our technology and the chips that our licenses are building around it really achieved very, very high levels of performance And therefore, we believe that we should consider the entire mobile computing market to include a laptop devices within the addressable market as we see it. So when we think about that redefined market, then we consider that we have a greater than 85% market share. Our mobile smartphone is still a very high proportion of that. And one of the key things that's getting a lot of commentary at the moment is how the growth rates are changing. The growth rate over the last few years has been very, very high, 40% CAGR over the last 5 years. I mean, that's a growth rate of very few markets go through, and they certainly don't sustain it forever. And we're going into a phase where growth rate is going to slow. I'm going to pull off a cliff. It's going to slow, and we believe over the next 5 years, we're looking at about a 7% CAGR This is adjusted power data. This is market data, taking into account what we see, what we hear talking to, our partners working in this space, and what the, you know, the world's, analyst community who go go to their market, believe that how the market is going to ship. So given this lower growth, and again, that's higher than many markets you might have come across, but given that lower growth, why are we still excited by by this market. Well, 1st of all, it's a huge market for silicon. Even in that lower growth end unit world, the amount of silicon in devices is going up, the sophistication of those silicon devices is going up. And the market analysis that we see predict that the value of all the silicon sold into mobile devices goes from about 1000000000 to 1000000000 by 2020. So that's a lot more silicon. And all of those silicon devices, we believe there's an opportunity for an ARM processor an opportunity to create a royalty for us. And whilst the growth may be slower, there's an opportunity for us to have an increased content and an increase in the content per device. And a lot of that is built around a lot of that assumption is built around the introduction of version 8 of Beyond Architecture. Now that's something we've been talking about for a few years now. And version 8A, which is the variant that's specifically targeted as application processes, has seen very rapid adoption by chip companies looking to target this space. When we think about last year, version 8 was in about 10% of the application processes that was sold last year. We think on the end of this year, it would be in about 50% of smartphones that are being sold and up to about 90% by the end of next year. The other factor that's going on, as well as the adoption of version 8 of the architecture is the increased core count in smartphone. Many devices now being designed around an 8 core device and optical core processor. And we think of the, version 8 architecture application processes that are being sold in by the end of 2016, about half of those will be based on optical implementation. And that drives, more royalty grants. Now that's something that's going to grow About 20% of the VA processes sold in Q1 this year were optical. We think that's going to grow steadily over the next couple of years. So more on processing, in each of these devices, and it isn't just the CPU, with continued attach rates of our Marley graphics, about video technology, about display technology, there are other ways in which our royalties can grow beyond the processor. So although the end unit growth rate may be lower, the amount of on content per device, we believe is going to continue to grow and that is going to lead to increasing growth in arms royalties from mobile. So our goal is absolutely to maintain our share here, to grow our share, as best we can, to maintain our share in smartphones and tablets, and grow in clamshell devices. That is a new opportunity to support it to us by virtue of the performance and the energy efficiency of the technology that we're delivering. Now a lot of the improvements you've seen in your mobile device over the last few years has been in the kind of conventional parameters speed, it's pixel size of the screen, it's connectivity. And you're going to continue to see that. I mean, even just, in the last week, we saw Tony, I think it was launched a phone with a 4K display on it. So screen sizes are going to continue to go up as we get to 5G connectivity is going to go up. One of the things that may be less obvious in your device when you go into a phone store and look at it is the increasing amount of expensive technology that's being built into a handset. Now that's going to continue to grow. You're going to see your handset interacting with other devices, information being shared across devices. The interface to your device changing really quite fundamentally. I mean, if you think about the early implementations of voice control, it's pretty clunky. Mean, in my car, I have to pretend to put an American accent at times to make a call, depending on who it is, that's going to get a lot better. It's going to get a lot better because the some of the sensors, the way the, the multiple microphones and noise cancellation, and it's going to get a lot better because of the processing in the device itself. So your handset's going to start to communicate with other things, your car, your home, your office space, and fundamentally, you need more processing and more sense as to make all of that a reality. And that is more content that will be in our pocket, over the next few years. The device is going to improve. It's going to take hold what appears to be artificial intelligence. We'll talk about that at the moment, and it's fundamentally driven by version aid of the architecture. We have designed this to be the computing platform for the next generation of smart mobile devices. One of the things about version 8 is that we've introduced features to make it easier to build these multiple devices busters of multiple processors. We've made it easier to write software that runs across these devices. We've made it easier to partition that software from other pieces of code that you might be running. As we become more and more dependent on the smartphone that we carry around with us, a security confidentiality of the materials that's on the phone become more and more important. So again, with added features within version 8 of the architecture to make security better. To make the device more trustworthy, security, and trust go hand in hand, and a really important attribute, not just the phones, but pretty much everything that we're going to do. Again, you'll hear a bit more about that later on. The version 8 has been architected with the future in mind, thinking about some of these new use cases, thinking about the performance that you're going to need and designing the architecture so it can scale up and scale down across those performance needs and add those key features. Now one of the other things that I think is really exciting about the mobile phone space, the mobile device is how competition is driving innovation. We're seeing many still many OEMs in the market, and they all want to be number 1. So they're competing with each other. As they're driving the need for more sophistication in the silicon devices. So one thing we hear regularly from our partners is that they need to provide more sophisticated shifts every year, and therefore, we need to provide a platform of IT that becomes more and more sophisticated every year to match that cadence of product introductions. So when you look at our product roadmap, as shown on the slide here, lots of part numbers, lots of names, but you can see what we're doing for mobile is introducing a new family of technology on an annual basis. And this is specifically to meet the needs of our customers allow them to meet the needs of their customer. The more technology is being introduced frequently, which is why Pete needs more engineers every 5 minutes than I ask him. And it's driving an opportunity for increased licensing in our business as well. So we have many new products coming. It's been many code names here. I'm with chopping these down. I'm wondering what they are. We'll tease you about that later on. And obviously, there'll be formal product launches at the right time. Now I often tell people that the microprocesses are useless without the software that runs on them. And I spoke about how we've developed our ecosystem to really ensure that our technology is usable, not just by our licensees, the people building the chip, but by people building a system around the chip. And as well as working with, with foundries on manufacturing, with EDA Companies on design tools, we've spent a lot of time collaborating with our partners to create the right software environment source. And we saw a need to, collaborate within our industry of partners on the optimization of open source for us. So 5 years ago, we created an organization called Lanaro. At this time, that had just a handful of companies, about 5 or 6 companies that participated, We brought about 20 engineers together to form the part of an organization that would optimize the Linux kernel on behalf of everybody who wanted to run that on an ARM processor. Over the years, that has become a really successful endeavor. We now have about 30 different companies. We have about 250 engineers from across the partnership working together to optimize different parts of the open source stack focused on different end markets. We have programs running in Lanaro focused on networking, on enterprise, on mobile, on portals, on home, consumer electronics, many different programs are running within Nanara. This has been very successful for us, and it's enabled more optimized software available for anyone than he wants to go and address the market. So I believe has, accelerated innovation. And it's to the point where now Lanaro is actually the 3rd largest contributor to the Linux Journal, and that really is quite phenomenal. So in just in conclusion then, we're going to continue to invest in this business. We're going to continue to invest in mobile into our most important market. But a lot of what we do in mobile, flows down into other markets, the technology that we create forms the basis of products that we produce for other end markets. As we continue to invest as we grow our portfolio, that enables us to provide more value to our licensees and we get paid for that value that we generate that we provide. And it enables our partners to spend their R and D on the things that really do create differentiation for their end product. We're going to add technology organically and we're going to continue to add technology through M And A and then investing in the teams and the technology we bring in and in parallel investing in our ecosystem to make sure that anyone contemplating building a putting an ARM based system has everything that they need, whether it's a trauma, or from one of our partners. Now mobile is really important, but what I want to do now is switch gears and start talking about some of the other markets. Later on, you're going to hear about IOC from Mike. And next, though, we're going to spend a bit of time talking about the opportunity that we've had in enterprise infrastructure. And by that, we mean our networking, and we mean servers. Now I mentioned Pete a few times, he's got he's the guy with all the engineers. He's stage of is making sure that we have the right roadmap of technology and that we have engineering teams focused on delivering it. So he's going to describe what we're doing to address these markets But first of all, I want to show a short video, which is going to show what's going on, why this market is changing, and therefore, why we see it as a really exciting place for us to be. Today, we are increasingly reliant on our connection the cloud. It allows us to exploit the value of the sensor driven devices many of us depend on our phones, our tablets, cars, home appliances, and wearables. All producing and consuming more and more data that enriches our lives and makes us more productive. Between these devices and the cloud lies a vast and complex network. All around us devices capture and transmit a constant stream of information to the cloud for processing. At the same time, massive amounts of data such as video and audio streaming flows back to the endpoints for consumption. This churning bidirectional traffic can quickly clog vital data by creating a more intelligent flexible cloud that allows cloud applications to extend out into the network closer to the endpoints total network congestion reduces and application performance greatly improves. For example, SensiDAY can be analyzed and aggregated to reduce traffic going upstream. Content service can be pushed closer to consumers improving aggregate bandwidth and responsiveness. In the intelligent flexible cloud, these new services can be adjusted dynamically between nodes based on the evolving application mix. Flexibility also means the network can scale more easily as bandwidth grows. Making an intelligent flexible cloud, the solution to address future devices and services. Good morning. For those of you who are listening to that on the phone, the video really helps. I'm sure. So what I'm going to talk to you about today is of the work that we'd be doing in enterprise infrastructure, we've been working in that area for quite some time. We're very excited with the progress and So I'm going to tell you where we are and then how we're going to invest to accelerate the gains in that space. So for me, I think we're now at the tipping point. We're now at the tipping point where we have silicon partners out there in both networking and servers We have the software ecosystem ready. We have big demands from OEMs, from cloud vendors, from operators from Arm Technology, and now is the right time to invest a small amount, a small and limited amount, to accelerate our gains. I'm going to cover exactly what we're going to do in that area. Now why are we excited by this space? Because it is a very, very large space for us. So Simon covered the mobile TAM for us is about $25,000,000,000. If you sum the enterprise networking and the server TAM, it's $38,000,000,000. And even more exciting is we have a small share in that. To mobile, we have 85 percent of the $25,000,000,000 market. Here, we have a very small stretch in a $1,000,000,000 market. So the potential is extremely large. Now what we covered on the video was the concept of intelligent flexible cloud. I think a few of you have been through that 4. What that basically means is we're moving from a world where we have big data centers, a fairly dumb pipe to gateway devices or terminal. And with the intelligence flexible cloud, intelligence is being spread across the network. So we are getting more compute. We are getting storage. We are getting acceleration spread throughout the network. So the networking and server world are colliding, which is very nice for us. It's very nice for our partners because what the end people, the OEMs who are deploying this technology want is they want the same architecture across all points. They want an architecture that would scale from Olympus, all the way up to the data center. And in terms of efficiency of development, it's also very nice because what it means is I can develop technologies, which are going into networking, which are also applicable into servers and vice versa. So we have server technologies, which we're developing, which we're selling to enterprise customers. So it gives us a larger customer base to deploy the new technologies into. Now no one supplier can provide all of these devices. It's impossible. There are just too many devices, too much optimization needed throughout the network So the only way that customers, that, OEMs that operators can access solutions in this space is through something like the ARM Partnership, a partnership whereby we're developing the base technology, putting it out through all our silicon partners, they're deploying it, they're customizing it, they're innovating on that, and then they're delivering it to the end users. So it has to come from a wide range of partners. Now to win in these markets, we need 3 things. So we need a scalable portfolio of technology based on a single architecture, a portfolio of technology, which can scale across all points. Simon covered, we already have technology which, we're deploying into mobile. That is also being deployed into these markets. In addition, we are investing to develop point solutions for both networking and servers. We also need a rich software ecosystem. The ecosystem in networking and servers is very large. It's very diverse. It's being forced to arm. We need to keep momentum going in that. And then the critical point is we need a set of end OEM, a set of operators, a set of plant suppliers who are pulling on this technology. And the reason they're pulling on this technology is because they want a software compatible range of solutions. They want a range of suppliers who are competing with each other. Arrange of suppliers who are delivering innovative solutions. A range of suppliers whom they can actually used to trade off in terms of pricing flexibility. So they want a wide range of suppliers, but at the same time, they want a, identical software architecture. Otherwise, they have to redo their software every time they change the plan. So this is the standard part of the ARM business model. This is why We've been successful in mobile. That's why we've been successful in our existing markets. This is why we're going to be successful in enterprise. So let me take you through networking first, and then I'll take you through servers. So in networking, every major networking chip vendor has licensed on technology. So you can see a range of logos here. You can see a range of design we have 30 platform shifting. This gives the arm architecture 1 of the widest deployed bases in the industry. I mean, just I'm going to spend a few minutes just looking at the range of partners we have up there. And the result then is that the OEMs can select from a range of vendors. They can have competition. They can have differentiation. They can have innovation. But they still need to retain their software investment. So what we've been doing is we've been working with things like, the open platform for network function virtualization. We've been putting together new ecosystems, largely based on open source. And the great thing about the network space is a lot of it is moving to open source. My engineers, customer engineers can work in that space. The collaborations in that area, things like the open platform for NFV are all based on ARM Technology. So we have a large partnership, large number of partners working in that space. All contributing back to the same community. And Simon mentioned Lanaro. Lanaro is a key part of that through our LNG group in Lanaro. A lot of this work is pulled together, and Lanaro is now the number 3 contributor to open source. So we have talked and we have updated you on our progress in the networking market for some time. I think last year, we said we're around about 10% of the networking market. That's actually fairly concentrated. So one of the areas that's concentrated and one of the big areas that's concentrated in just now is wireless access. So this is base station. This is remote radiohead. And in this particular area, in this particular sub segment of the market, this year, we're going to be about 30%. But 30% of the shipments into this space are based on arm design already. And by 2020, we see that moving to 75%. And for us, this is a standard way of deploying. So we find the subsegment of the market. We technology into that. We get the ecosystem working. We build very good relationships with partners and then we move to the next So in wireless access, 75% by 2020. Simon talked about my engineers. So I'm going to take you through some of the investments we're making in this space. So, clearly, we're going to be investing in cutting edge SSC Technology. And in networking, that means we are designing Processors in conjunction with LEAF partners, some of the 30 partners I showed you earlier. We're developing network specific processes. The processes, which are designed purely for networking. We're also taking existing deployments, existing software, existing workload, running analysis on that in our labs and feeding those results back into current design and future designs and future generations of our technology. We're also investing in next generation software adoption we are leading open source developments in those places. We've had a lot of requests from our partners to, invest more in this area. To work very closely with them, and that's what we're doing. And then a key part of getting to volume getting to market is enabling end OEMs and operators to deploy to market. So there, we're working very closely with and operators and end OEM at an engineering level. The three areas of investment. And if I take you through some fairly detailed examples here. What you can see is we have 3 separate architectures here for base stations, customer premises, equipment, and cloud ran. And you can see one size definitely does not fit all. There are very, very different see architectures here, very different mixes of CPUs, different interconnect, network Processors, accelerators, They are very distant. They are very customized. And you need to do that. We need to do that to get the throughput in the network. We need to do that to get the power efficiency in the network. We need to do that to give the differentiation to the end OEM. So 3 very separate architectures, all based on our technology, some based on generic CPUs, some based on very optimized TVs. And so my engineers, my teams are working to produce customized solutions in that space, and it's not just ProScenters. We're rolling out new interconnect in these areas as well. And what that allows then what that gives the OEMs is a range of devices from highly accelerated at one end all the way to massively monitored. So they get a very wide range of highly differentiated solutions in the silicon department. Of course, the problem then is you then need to leverage your software investment across different semiconductors. There's no point in working on one particular solution and being unable to move. And as the solutions are more and more customized, can be difficult to move. So what we've been doing through Lanaro is coming up with concepts like open data points. What Open Dataplane allows is it allows the OEMs, it allows the vendors to actually develop their software. At a very high attraction layer and take out a lot of the acceleration complexity And then when they run it on the device, it moves either from software to hardware. So this is a key facet of deploying optimized solutions. Have to be able to deploy them, get them adopted, and still allow OEMs to retain their software investments. And as I mentioned, it's all very well. We have the hardware out there. We have software out there. We have the OEM pull. In some cases, we need to get that kick started. So we are putting engineers with the customers to help get these things applied, to help address various segments and then build on that. Now we're going to track this on a regular basis. Think you're used to the so called Smarty chart. We're going to produce one just for networking. It's slightly different to our normal chart. In that this is based on OEM. So our normal charts are based on semiconductor partners. This is not. This is based directly on OEMs who are shipping on base silicon. And if you actually had if you looked at this last year, if we produced it last year, you would have seen wireless access slightly more orange than green, and you would have seen areas like wired access and enterprise would have been all red. So what you can see is we are moving OEMs gradually. We're moving OEMs from no arm design wins to arm design wins to starting to ship armed design wins. Clearly, the end results of this is we want the Multigo blue, but getting at this point from red to orange to green I think is a good step forward. And the subsegments that we're going to focus on next wireless access is doing very well, as I say, 30% market share this year, growing to 75% in 2020. Wired access, enterprise equipment and storage and curricy are the next areas we're focused on. And you can see that they will gradually turn the right color. So having made this investment, having gone through this progress, I think last year, we talked about gaining a 35% percent share of an $18,000,000,000 market. This year, with the investments we're making, we're up in that. So we're increasing that to 45%. So by 2020, we expect the ARM Partnership to be addressing or taking 45% of the enterprise networking. So that's networking, very similar pattern in service. The servers are deploying. We have several momentum building. There are 6 chip vendors in production already this year. I'll cover details of those in a minute. Have at least 4 more expected in 2016. So a lot of silicon is out there now. A lot of silicon is being produced, actually some of it is outside the NIK in the 20. Very similar pattern in terms of software ecosystem. So the first commercial OS was applied in 2014. There's a large number of additional assets, which are at the developer stage, which we are working with people to get to commercial deployment. And again, one of the particularly nice things about this market is all the major companies in this space all the major and OEM, all the major cloud vendors are evaluating our base solutions. Now the solutions are out there, people can evaluate them people are researching in the labs, people are starting to deploy them. So very happy with our progress. Here are some examples of the silicon partners that are already shipping. So you can see on the left hand side, the partners that are shipping already. So 6 different forms of silicon. On the right hand side, you can see solutions that are on the horizon. Solutions that have been announced, there are more on the work that these are the ones that have been announced already. And you can see it's a very diverse range. We have companies in the U. S, we have companies in Europe, we have companies in China. We have merchant Semiconductor vendors, we have OEM teams. So a very broad base of Silicon Partners. The armed silicon server ecosystem is very, very healthy. And what that ends up in is devices, is racks is for people to buy. Again, you can see some of these things that apply. And I think you can see from these pictures, again, one size doesn't fit all. There's a lot of competition. There's innovation in this space as well, not just on the base silicon. But in terms of solutions. And some of these solutions are optimized for specific markets. So there are storage optimized solutions, there are networking optimized solutions, and then there are compute If I give you some examples of the deployments that we have ongoing, we have a range. So we have a standard cloud compute, Sandra. So folks such as OVH And Data Center, so they're deploying, armed servers into the clients that you can go in excess on service online right now. Folks internally like PayPal using solutions for things like data analytics, analytics to the Securly internal. And then one of the things I think is quite interesting is we have multiple HPCs for high performance computing. Deployments as well. We have them across a range of, geographies. So there's the U. S. Folks, there's Sandia, there's the Barcelona supercomputer. And one of the things you can take out of this and one of the things which I think is a big change over the last year is we're now addressing the entire market. So the ARM Partnership is now addressing the entire server market from low end servers all the way up to client performance. In fact, I was talking to a memory vendor the other day, and they said, their most challenging demand for memory bandwidth, memory performance are coming from ARM based farms. So again, we're doing investments in this space. Again, we are developing technologies purely for server purely for enterprise. Now luckily, it spreads across networking as well that some of the products we're developing into network and some of the products we're developing go into servers, but there are some very high end processes coming, which are just purely for servers. Again, we're working on optimizing the software. There are thousands of packages out there already for ARM. Tens of thousands of packages out there for the armed servers. We're optimizing those. We're working with partners on those. And we are getting the deployment to volume. So again, it's great having the technology there. It's great having the ecosystem there, but we want commercial deployment. So we're investing directly with end users and cloud vendors to get those proof points out there to make sure that we're deploying things and then speed that back. Now in terms of development, clearly, we have the developments we do internally. We have all the process of developments. We have the interconnect development. We also work very closely with foundry. So some of our server partners are, implementing right now in 2016. Some of them are targeting 10 nanometer, some of them are targeting 7 nanometer. And what we're doing with our physical IP is, again, we are producing physical IP, which is targeted purely for servers, a very different constraint, very different requirements in the service space, to a mobile app, so we're customizing everything from processor technology, interconnect technology and physical IP technology just for service. We're working very hard with the developer community. So this is not just an arm thing. This is a snippet across the entire partnership. And the great news is we are leveraging clearly resources as our partners. Out there in the developer communities as well. So we're helping all those developer communities. We're helping them by providing them with access to RBA a hardware. So 64 bit hardware is out there. I mean, we're providing it direct. You can also go online and get it from the cloud vendor. We're conducting proof of concepts with software partners, and we're working upstream in the software community to create our versions of those platforms. So all the work everyone is doing is aligned, and then it is going back into the open source community. And what this is helping do is expand developer these going on. So we're leveraging the ARM partnership. We are leveraging the developer community. Now as I said, initial deployments, we have initial deployments in storage. We have initial deployments in cloud. We have initial deployments in XBT. That's great. Very happy with how that's going, very happy with how that's rolling out, but we are investing further. So no parts of the market is now restricted to us. We are going after the ARM Partnership is going after every single bit of that $20,000,000,000 down. Now, again, we are going to be communicating our progress in this space. You. We'll break it down in terms of how we're doing in high performance computing. Right now, I think I've covered it the deployments are going on at National Labs Research Institute. We have 4, with advanced proof of concept in HCC. Not a very high value market, but a very high value market, but a very high value market. Our cloud deployments lots of evaluations going on at different cloud companies, some are rolling out, some are in the process of rolling out. And then enterprise, have a lot of enterprises starting to evaluate the technology internally. Now last time we talked to you we said we were shooting for 20% of the market or the server market by 2020. Today, we're increasing that. So with the successes we've had in this space, with the customers that are rolling our product, the ecosystem investments that we're making we're going for 25 percent target share in 2020. So that's 25 percent of that $20,000,000,000 market. So hopefully I'm covered how we're investing to accelerate our share gains. We're very happy with how we're doing very happy with how we're doing with server. Now is the time to do small focus investment to accelerate our game. So a lot of focus on the technology. We're rolling out a lot of focus on the software ecosystem and then working directly with their OEM. To get those solutions into market. So thank you for listening. We have a 15 minute Good afternoon. Good afternoon. I'm in the wrong country. Good morning. I'm one of the CTO. I appreciate that I am between you and the money. So I will try and keep it relatively short. And I was told that at CTR, I was allowed to lose some of you, some of the time, but I wasn't to be to techie. So we'll see how I go with that. So I'd like to actually start with a little bit of history. Three of you in the room are old enough to remember, the BBC Micro, which was an education project to teach children in the UK house a program. And that was in a company that, started the birth arm development, and we created the first arm silicon in 1985. And 5 years after that, Bond would spawn out as a separate company, in 2019. And we're now coming up to celebrate in November 25th anniversary. And as part of that, it's nice that we've actually gone full circle back to the BBC and there's the launch of the BBC micro bits, which you'll see outside, which is effectively the BBC micro for the, modern generation. And if you look at that BBC microbit And compare the processor in that, a CORTEX M 0 with the first ever arm that we developed, arm 1, 30 years ago I find it quite interesting that, they are about the same design team 6 man years to do the original arm, about 11 man years to do CoolTec M0. They have about the same number of transistors, 25,000 versus 48,000. The technologies that they were built on are very different, 20 nanometers for CoolTech M0 compared to the 3000 nanometers or 3 microns a year at the time. And if you look at that, that's a difference of about 150 times on the linear dimension. Chips are of course 2 dimensional, but that's about a 20,000 times reduction in area. So you could fit 20,000 core tech M 0s on the original chip that we designed. And that's kind of Moore's Law that 20,000 scaling factor is what has either turned a $10 ship into a $0.10 ship or allowed us to have all of the complexity, that we have in a mobile phone today. And so we thought it'd be nice in my research group to kind of do a, 30, 25 year anniversary edition, core tech M 0 and see what would happen if we built a, a cortex then 0 on a, effectively a 2 mic from a 2000 nanometer process to take us back in time, to what technology used to be like. So we produced this anniversary edition contact them 0. And here's a wafer. Now of course, normally on a silicon wafer, these days, I think they're a little bigger than this, and you have, 10,000 contact M 0s on it, but because it is old style technology, they only get 12 contact M 0s on the chip. There's one thing that actually really makes this anniversary addition. For me, really exciting, and that's that you can do this minute, okay? It's not a silicon chip. This is actually printed on plastic. And because of that, you can actually you can eat it. You can wrap it around a a busy drink container you can spool it out on on bath printing machines. You can start to do all kinds of things that I think open up new opportunities for IoT. Now this is a research project. We partnered with a company in Cambridge called pragmatic, who do plastics printing technology, you know, the chips that they're doing for commercial deployment today have a few 100 transitional nets and are really small, we push them to the absolute limits due to make a chip with nearly 100,000 transistors on it. So this is some years away from being a commercial reality, I'd say we're at the hundreds rather than the tens of thousands of transitions, but we can make it in the lab. And I think this kind of points the way to how IoT will actually enable us to put electronic in around on and underneath all kinds of devices that we've never thought of before. So for me, that's kind of an interesting insight into what the world will look like. And being an engineering thing, it's got a roadmap. It's got a roadmap like Moore's Law. If you look on the left, it's where we've been doing our pro type development, the number of transistors you could fit on the chip is actually doubling in the same way as it does in transistors. The imprint technology is based on all of the technologies used to make CDs. And if you then follow that through and go from CD manufacturing, to DVD Manufacturing to Blu ray Manufacturing, you start to get down from the 2 mic from 2000 nanometers that we're at with us today, through to tens of nanometers in the future. So I predict that, you know, around 2020, I'll be able to show you a chip of the complexity of a Cortex A5 or that chip that I've just shown you now about this dies, the size of a small, small chip today, which you really could put on in and around your clothing, not even notice in there. So I think there is an interesting road to future development. So what has changed in this kind of 25, 35 years of development from the original BBC machine through to the microbe? Well, I think what's happened is apart from Moore's law, driving either reduced costs or increased complexity, we've actually gone from a world that had stand alone devices to devices that are actually connected to the cloud and interacting that. And that's brought us great opportunities for a whole new product ranges and whole new services. But what is also brought to us is the whole of threat of people attacking those systems. Once you no longer just have your machine in the cupboard and it's actually out there and interconnected, you're under attack in many different ways for many different people, whether it's malicious, mindless, or really after your money. So that, I think, for me, is one of the most significant changes that happened to our industry, and the whole issue of security is becoming to the forefront. So last conference I went to, slightly different demographic of the audience. They are engineering conference. Some of us are a little more specific than others. And, and, it's a fairly normal distribution of engineers. We thought, well, we need to find a way of actually, socializing them should I play. Getting them to talk to each other, interact. And so we commissioned the creation of an app for the conference, and that allows you to vote on panel sessions you've been to to make posts. And by making posts, you win prizes. And then there's a leaderboard, and there was kind of a nice, interesting, competition between people to, how could you make meaningful posts and get people to like it? You know, liking, but even more points you went up the leaderboard, there was actually a good way of actually creating some social engineering in that community. And after the 1st day, the basically, I was sitting at dinner where 2 of my colleagues, the research group, who specialize in security. And I turned to the matter kind of how secure is it? And they kind of picked it up, and they kind of went, well, we don't know because we didn't think you'd approve if we had a look But if you're asking us to happen, we will. So this was 10 o'clock at night. They disappeared and met them back for Brex 1st. And they said, well, it took us 2 a half hours, and then we got bored. And I said, well, what if you find out? And so I'd like to, in the next few slides, try and explain what they found out, and then I'll say why I think that's relevant. So if you have an app running on your phone, and that is the same as an embedded IOT device somewhere built into this building talking to a server. Right? It's really the same problem whether it's a phone and an app, or as I'll come back to a light switch talking to a building manager. So the first thing you want to do is to stop people eavesdropping those of you who've connected to local Wi Fi network here in my office? So you want to stop people being able to listen to what you're doing. And The way you do that is you encrypt the communication between the server and the phone and you use a certificate to say who you are So the server has a certificate that stays authenticated, and you check that with a certificate authority. It worked. The channel is encrypted, you can't do it at all. But what the guys did, they said, well, we've got this phone and we've downloaded that to it. Why don't we take our laptop and on our laptop, we'll run an emulation of the phone, it's Android. You can just go and get rid of the reader, and we'll download the app and run it on our PC. So you're now running the app actually on a PC, emulating the phone. And because I'm emulated to install the phone, I can intercept the secured communication and put this eavesdropping device team, and that's called the Man in the Middle probably third what it is, we're going to try and explain how you now execute the manual integration. So you still have the server with the certificate going to the of authority, I can't hear what's going on. But on the PC, you say I'm going to choose the political make it smart. I'm then going to intercept the certificate and put in my certificate with my certificate authority authenticate And all of a sudden, I can now see what the communication is between the server and the app running on the end. And I can see all the traffic. Now how did that happen? It's quite simple to fix, it's called statistically. And the problem is the app trusted the phone. He said I have a certificate, phone, please authenticate that this certificate is correct. What they should have done is they please check that this certificate is correct with this particular certificate authority that I trust. You'd have to choose 1. You'd have to make sure it was available in all the regions that your app was being deployed. You'd have to do a little bit more work. But if you don't do that little bit more than you were, just susceptible to a manual logger. So now my guys can see what's going on. They can look at the messages if do anything, but they so the next thing is, well, I actually wanted to start trying to create messages and do things. I need to log in. And the app developers got this right. Even though we could crack some of the passwords, we couldn't actually penetrate this system because the whole thing is protected by shared key. So there's a secret that the server knows and the app knows. We don't know what that that that shared actually is, so we can't actually do anything about the scratch there. It's after about 20,000,000 And they went back and looked at what is the application we've downloaded? We got it from the Android app store, and the application they downloaded contained 25. One of them is the program for the And the other one was a file with a magic key in it, which is the shared app key. And lo and behold, the shared app key in this separate file, was in plain text. And you're off to the races because now could actually log in and start doing things. The question is, why was the shared vaccine in 20x in time? Well, Secure provisioning itself, you're building a company, you're dealing with tens of thousands of clients Each client, you've got to give a separate key to. So if we're in the same footprint in the same building, different conferences, my app won't talk to your app, They need to have different shared keys for each one. You need those teeth to be generated by your support staff that you haven't really put in a secure substructure to manage these keys, distribute them, upload them onto the app store, just easier to make the key a simple key that you actually use So secure provisioning. So we now cracked the app, but you still got to do is about what does it take to be a hacker? So you've worked out that you want to get top of the leaderboard. And where you get to the leaderboard is to make a post. Well, now we can make a post and win points and repeat but it's a little unsophisticated because I'm just gonna cram all the post against myself, and people are gonna look at that and go, well, when you are approved or you're doing publishing things, obviously, others were up as rubbish in any point. So they thought, wonderful, Do you think you can delete a message? I've never seen a delete message go across the channel because in the app, you can't delete a message, but you probably can. And I guess that that's just going to be called delete dot message. So let's try delete dot message and see if it works. And lo and behold, you can delete the message. You can post, win point, delete the message, repeat, and nobody knows what you're doing. Now being hacked, they're also improved because they say that some people desperately posting useful material to get to the top of the leaderboard. And, you know, at the last minute, guys that did it, pushed themselves to the top, took me with it. I didn't even register onto the app. And suddenly, I'm I'm I'm I'm second on the leaderboard. So why am I telling you this? Because this was a web store company deployed in tens of thousands of clients running, conferences every day. And They've got most of it right. Okay. Pretty good security. They knew what they were doing, but as in many systems, they being a little careless in a few places because it was hard. The reason I'm telling you this is, because we need to make this work for someone dollar devices built by people who But as I said, that phone running an app is really the same as the light switch in this building controlling this room connected to a building manager. And if you can't make those systems scale and make them trustworthy, we won't get the deployment. Because if I own a 1,000,000 light switches, each one of them was deployed as a dollar, not really high value, I'm not going to put that much effort into the security of it. Where's my where's my return on that $1 microcontroller is the $10 likely? If I control a million light switches in the city of London. And I decided to turn them all off, turn them all off, turn them all off, turn them all off, turn them all off. I haven't probably crashed it out. So you can do serious damage from a $1 microcontroller if it's deployed at scale, and I find a way to take that over. So we need to solve that problem. Solves that provisioning in a secure way and allows you to manage those devices. So I'd like to give one example of a partnership that we recently announced with IBM and explain why, why are they engaging with us? So IBM has a massive business scale in deploying big data applications, whether it be to manage your city or your business. And the large complex business, but they need to attach to a large number of devices in those smart cities at once. What our platform offers us is the ability to integrate the server side software we've developed into their cloud offering once And then that can communicate with all of the variety of clients, the tens of thousands of different SoCs built into 100 of 1,000,000 of different products. On the left hand side, and they don't need to worry about the diversity of these IoT clients on the left hand side because they are all abstracted in one clean way by the software that we've installed in their servers, in their cloud and the right So we offer them the ability to get access to diversity of ISB clients, while then having to only do a single integration into their plan. And that is one of the main value propositions that we have. We are dealing with the complexity and the diversity of the armed communities that we understand we're taking that embedded world and packaging it in a way that the web and cloud developers understand not only solution. And of course, the way we do that is through our traditional semiconductor partner to actually have to build all of them chips, they embed our client software, right? We worked with the device ecosystem player to actually turn the chip into the light switch We work with a cloud provider who can then actually offer service that is then deployed to either OEMs, cities, or individual users. And the MBS platform started some years ago, we developed a good community from that. And in the latest incarnation with all of our web technology, We've actually now got significant engagements with most of the semiconductor guys, developing all of those embedded controllers, good partnerships on both the cloud and, of course, the ecosystem sites and real deployments by OEM. So I'd like to just look at a couple of sort of end deployment on the professional end of the spectrum. As I said at the beginning, I think there's lots of IoT development going to be done on the kind of make a kick starter end of the project, but all of the money will actually come from the commercial industrial professional end deployment. But it's something that will apply to both both ends of the market. So just going to take a couple of the professional deployments that we're engaged in. The first one is GE Lighting. And GE lighting, are deploying smart lighting, their light grid solution into 20 cities, in in America and Latin America. And the picture on the right is actually of a deployment in San Diego. And the way this works is On technology in the client is actually in each of the light bulb in each of the lamppost. They have local area networking that allows the lamppost to outperform an ad hoc network. So the lamppost finds the next nearest lamppost which then talks to the next map post, which talks to the next one. They form a grid that has redundancy. So one light bulb failed. You can probably manage to talk to the next light bulb beyond that, and then just a few of those lampposts are actually connected to wired network. So their cloud infrastructure talks to 1 or 2 of those landfodes connected to the wide infrastructure, and then the rest forms an ad hoc network to allow you to manage the lighting in smart city to make it safer to save energy and do all of those good things to do. And it's a significant, market segment. By 2025, there'll be over 90 cities that have seriously deployed smart city and smart lighting infrastructure and out of the predictive 5,300,000,000 devices that are going to be deployed there, $4,500,000,000 of debt we shipped and we shipped in the next 5 years. So significant margins here, perhaps there's quite a different one. SK Telecom partnered with us to do Smart Fishfarm, okay? It's a big market, okay? Actually turns out to be a fish market and it's a similar problem. Do you have, a fish farm in a fairly rural area dotted around the coast or tidal lightweight. And you have to monitor water quality, pH, temperature, need lots of little sensors deployed throughout the Fish Farm. You need them to form an asshole network and talk to each other. You then connect to SK Telecom Backhaul over 33g to their cloud, and they've been provisioned in their cloud. Embed device server to allow a third party to then write a SmartFISHpharma form app. So you then access as a Fishpharma that app that allows you to monitor and control multiple bumps within your regions. And again, precision farming is going to be a significant business, as global population grows to 10,000,000,000, food production goes up by about 70% there's over a $5,000,000,000 market in actually deploying infrastructure into those markets. So IoT tends to be a fairly fragmented thing. People talk about all sorts of kind of wacky things, including a lot of the kind of personal wearable devices. That is a big part of the market, but there's also a real, become commercial industrial age of the market as well. So if you just look at the products we have, embedded device server deployed in the cloud, embed client software, deployed on the chip, The chip itself, which is what Arm traditionally is engaged in, and an ecosystem goes with it. And to explain, how we make our money, well, We're licensing the software in embed device server in a recurring revenue per use per transaction per device fashion. We are providing the device software for free. It's free. It's open source. It's about engaging in a design community that As you say, that's when you go from the thousands to the tens of thousands of different developers, you need to make that easy and open and accessible So it's free software to get wide deployment. There is the classic hardware IP visits we have today with hardware licensing and royalty and the ecosystem is built on which has optional membership fee. Another way to look at this is why do those partners engage with us or the chip guides engage with us for our hardware IP to build chip, the software IP to make it easy for them to build those devices and get access to developers, they can go to developers if they give my chip, it's easy to program, it's ready to go. The cloud partners want access to devices in that IBM. For example, it's about how single integration then they device server allows an access to this very wide range of devices. It allows them to have trustable data. You need to know that the data you'll get it from your Fish Barn is at been accurate and reliable and not spoofed by somebody else and allows you to manage those devices. The OEM partner who's buying the ultimate service has the trusted platform. And if you want to become, a deeper partner with an ecosystem by paying membership fees, that you get early access. You get access to source code for refinery components. You can actually deploy products. So let's just quickly look at one example. Here's a little, tiny Bluetooth beacon with maybe a 10 year battery life. What does it take to build that? Well, you have to build the FOC, the chip at the bottom. That's our traditional business. You're going to be using a call tech end processor or course license fees and royalties. You're going to be building it using our physical IT generating incremental license fees and royalties. We recently launched a sub 1 volt radio to actually make it easy for people to build those local area networking with things like Bluetooth, where we made recently 2 acquisitions with Sunrise, Sunrise Centric, and that brings us again incremental licensing and diversity. And recently, we made an acquisition of Fanta, and part of their technology is actually of technology that goes into those chips to build trust into the very bottom of the stack from the hardware. So that's the hardware. On top of that, you have to put your real time operating system. There are 100 probably a penalty of them out there in the world. Very fragmented. We looked at that and said industry needs consolidation, One OS is better than a 1000 for development, but it needs to be architected and secure from day 1 Not a question of adding security to the solution, it's actually architecting a new ground up. So there is a low liable microvisor that actually provides control for how you manage secure assets, how you stop some of the mistakes that happen, with the example I gave at the beginning architecting it from the bottom up. In some cases, it's prescriptive, but if you do it this way, it will be successful. Challenge with a lot of the web development is there's a 101 ways of doing a bit, 2 of which are secure, the rest which aren't. And if you don't really know what you're doing, you aren't going to pick the right combination. And make it easy for those developers. Build on top of that, a classic set of device drivers, an embedded OS operating system and all the application that goes on 20%. And again, the acquisitions we've done from Fanta and off spot have added critical security components into that protocol stack to make this something that can deliver a trusted platform. And I think if you do that, we can actually achieve kind of extraordinary numbers that you see being published for IoT that are back to those, CAGRs of the mobile industry each you each one of those segments isn't the scale necessarily of the mobile industry, but each one of them is growing significantly, and each one of them becomes in itself, a really interesting business to our aftermarket business. So full circle, BBC Micro a bit. You'll see that outside if you want to play with 1. Why are we involved in it? Well, two reasons, the kind of sorted commercial side, it's built on our Membed technology. We're getting armbed technology out there to the millions of new developers that we hope to create because we need more software savvy school children to become web developers, mobile developers, but when they grow up, it's probably they're going to be IoT developers rather than mobile phone developers. We want to make sure that for the long term, we're feeding that community. We're getting our technology deployed scaled really quickly, and I think it's a really exciting program. So in summary, if you look at what we're trying to do for IoT, from a hardware perspective, without bringing additional components, to actually generate incremental licenses and royalties in the hardware side, with a port deck mounted slightly in the portal and radio. On the server side, we're actually fueling some of the demands for the servers our networking infrastructure that we talked about. I mean, a lot of the IoT transactions that are going to surrender some of that growth in service are ideally suited to, low power solutions built out of scale. That is the classic market that will drive, on server adoption. We have the free software for the embed clients that actually drive adoption of the solution and then licensed software into the cloud and OEM partners, which is where the revenue stream comes in. And I think put that together we actually have an exciting platform allowed us to move on forward in generating incremental revenues through the future. Right. Thanks, Mike. Great to be here finally, been a little while coming, and I'm very pleased to be here. And one of the things that first attracted me to 1 was the opportunities that it has both in the smartphone market, but also in other products and services. So it's particularly pleasing for me to be here as part of the team presenting that sort of net leg of the growth story. Now on a finance man, I've spent 30 years in commercial finance roles around the world, So 1st and foremost, what growth means to me and technology means to me is money and turnover and returns for shareholders. But there's actually a more personal connection for me as well. Not many people in the room will know, but I actually studied Electronic Engineering at Cambridge University in the early 80s, probably just a couple of years after Mike Mueller. I went in a different direction. But as I've gone through my induction to Arm, I have felt that sort of inner geek being awakened in me. So as I said, I'm really proud of the management team on this next leg of the journey. Simon, talk you through all of the investments that has put arm in the very enviable position it is today in smartphone and also the other technologies and Pete and Mike have talked about the future growth opportunities. What I want to do in the next 25 minutes is to pull all that together. And as Simon said, talk you through the financial implication. Before I do that, I know that some or many of you in the room will be interested in the short term as well as the long term. So what I wanted to do was give you just a quick update on current trading. So as we stand today, we've had a good proportion of the royalty reports in for Q3, and we've got a fairly good line of sight on the licensing deals that we can close. And off the back of that, what I can say is that we're comfortable with where Q3 consensus revenues is, that's subject to the usual caveat around licensing income. And we're comfortable with certain dollar terms and subject to what happens to the exchange rate in the next 3 weeks, we'll also come to an sterling term. We'll update Q4 in the normal way when we announce the Q3 results. And then looking further forward, I know there are some concerns around China slowdown, what that means to the end market. Farm is not immune to the end market. But I hope what you've heard here today demonstrate that the strategy of increasing our market share increasing our royalty content chip and developing new recurring revenue streams puts them in a very good position to outperform the general market. So having dealt with the short term, what I'm going to do is I'm going to do this in three sections. I'm going to take a look back at the track record of investment over the last 10 years because it's the successes of that investment that gives us the confidence to continue to invest for the future. I'm then going to describe the impact on the P and L of the initiatives that Mike and Pete talked about. Then I'm going to finish with taking you through our approach to developing a long term view of the financial grant and how we balance the needs of maintaining a strong resilient balance sheet, we need to reinvest in the business to give it future growth and to give cash return to shareholders. Almond's investment strategy is really clear. We'll continue to invest in new, more advanced processes, and that enables our partners to produce ever more capable and because we're adding more value, we can charge a high royalty per chip as we are doing version 8. We'll continue to increase to introduce new technologies to create new revenue streams. Some of those revenue streams come from existing partners, where we're giving them the opportunity to bundle to integrate more on technology in their chip. So you've had the example of Mali where mobile phone, chip manufacturers can integrate Molly GPU with a CPU in their application processes. And then more recently, what Mike talked about where partners have the opportunity to integrate cordier radio IP into a microcontroller in an internet of things device. And we'll continue to invest in the ecosystem to accelerate market share gain and to increase market share penetration. And that involves making sure that the software is not only available, but it's optimized for our technology. And what you've heard here this morning is simply a continuation of that strategy that works well in advance. So let's look back. What I see on this chart is a fantastic growth story. This is a company but it's grown its turnover from 1000000 in 2004 to nearly 1000000 last year. At the same time, It's expanding operating margins from 30% to 50%. And it's done that through a continual commitment to invest in technology to create future revenue streams. So let me give you an example. Started work on version 8 in 2008, very opportune time, the time of the financial crisis, when the end markets were in turmoil, licensing and royalty revenue was flatlining at best, but Arm chose to continue to invest at that time. OpEx went up as a result. There was margin compression. And then look, what happened afterward? In 2000 and 9, the first architectural license was signed in 2011, the first process of license was signed. And thereafter, you had a 30% compound growth in license revenue over the next 4 years. And now, today, we're starting to see the royalty benefit from that investment. And as you heard us, Simon say, by the end of this year, half of all the smartphone shipped in Q4 of this year will be based on version 8 technology? Moving away from GPU. Sorry, CPU. Amdocs creates new revenue streams from existing partners. So here's, as an example, we've got the Marley graphics. Please typically start with an acquisition, In the case of Mali, within 2006, with the acquisition of Spananc. At the time, the engineering team in that company was 30, Today, there are more than 500 engineers working on Marley Griffith. So that's a great example of how Arm has scaled things internally have been a couple of bolt on acquisitions to give video and display technologies as well. And that continued investment over many years and using the ARM ecosystem to leverage that investment means that today, Mali Graphic Processors, the number one shift processes in smartphones, in tablet, and in digital TV. We can also create new revenue streams from new partners. The investment in physical IP is a good example of this. As Pete mentioned and Simon as well, it's really difficult to, build chips based on advanced multiple processes using advanced manufacturing techniques. So arms investments in physical IP and providing that physical IP alongside the CPU IP means that we've lowered the barriers to entry for people who want to build, ARM based CPU. And one that's meant is that they've been able to abide by optimizing the physical design, they've been able to produce very low power chips with high compute. And that's given us clearly a boost for our license process of revenues because we're introducing your company to the ecosystem. It's also given as a standalone revenue stream as the leading supplier of physical IT in the market. And again, in the previous three presentations, you've heard about the ecosystem. Here are some examples of where Arm has led the industry in creating open source software which is optimized ground technology and help drive adoption, which helped drive market share gains and helped drive increased market share. So as we look back at the past, Now let's look at where we're focusing the investment today and how we're going to develop that going forward. Smartphones are still important. Even with the handset growth slowing into single digit, we expect our royalties from smartphones to more than double by 2020. So we'll continue to invest in advanced processes will continue to provide the graphics, the video, the display technology alongside that. And the goal here is very simple. Is to maintain our high market share and to increase the IP content and the value that we're giving so that we can increase the royalty ships. We're increasingly confident in network and service. We've got very competitive hardware We've got a roadmap to improve that and our pace on competitors. And here, the objective to invest further in the ecosystem to expand and optimize the software available. As you heard Pete mentioned, the goal here is to accelerate and increase our share gain. So we've raised our 2020 target on market share to 45% in networking and around 25% of service. What that means in real money is that that $3,000,000,000 of additional silicone by 2020, which will be unroyalty down. And finally, you'll have seen from Mike's presentation, we've got many opportunities in the interactive things. It's a market that's ideally suited from low power technology. In this market, we want to maximize royalty with it in three ways. We want to grow the overall market. We want to maximize our share within that market. And as Mike described, And the best way to do that is by creating trusted IoT devices and hands on investment security. And there's also an opportunity for us to create brand new recurring revenue streams from the likes of Emtek Design Server for enterprises who want to manage large network securely. So enough of the words, let's move on to the numbers because I'm sure some of you were itching to hear about those. So firstly, I just want to say putting 5 year numbers out is as much an art as a science. That what we wanted to do would give you a flavor of our ambition, give you something to basically model done. And numbers I'm going to take you through on the next few slides are the incremental costs and the incremental revenue from the stuff that you've heard, Mike talk about today. What you've heard about that time you talked about should already be there. So as you would have read in the RNS by 2020, we expect these investments to be delivering $200,000,000 of additional revenue. And looking at how that builds, in 2016, you'll get full annualized revenue from the recent acquisition of Sunrise Micro and of Samsung. You'll also get increased numbers of licensing wins in service and networks because of the investment we're making on the software. As we move into the middle years, you'll start to see incremental royalties in networking and servers. From the OEM wins, again, the software we'll accelerate in the early years. And you'll start to see some of the revenue that Mike talked about building up in internet things. By 2020, you'll have all of the revenue streams contributing. And because in large part, these are increased royalties and licensing from an increased share of a known market or new recurring revenue streams from IoT We expect these revenues to continue to grow beyond 2020. If we turn to the COGS, So first thing to say is everything you've heard here today is in our Q3 OpEx guidance of GBP 106,000,000 to GBP108 1,000,000. The investment in CPUs in graphics and physical IP, they're all business as usual. So all of the investment in mobile is already in the guidance. Will formally guide Q4 when we announce Q3, but you can expect an additional GBP 3000000 to GBP 5000000 over and above the normal year on year run rate there? And then regarding the investment going forward, most of that GBP 40,000,000 is people related. It's more engineers with a few business development guide to help organize the ecosystem. We'll be hiring throughout 2016. So you'll see the clock ramp up. In 2017, you'll see the full annualized costs because by then, we anticipate we'll then make sure the actual results you need. And then from 'seventeen through to 'twenty, you can expect those costs to grow much more modestly So as with the existing business, there is some cost now to generate revenues later. So you will see a small EPS dilution in 2016. It's more than offset by 2017 And because the revenues are growing much more rapidly than the cost, from then on, you'll see profits rising for 2020 and beyond. Now what I've shown here are three charts of high level numbers. And I hope from the previous presentation, You realize that an awful lot of detailed planning has gone into this. So for every initiative that contributes to these high level numbers, We've got a detailed plan. We've got milestones. We've got targets. And we'll measure ourselves against those targets. That we'll continue to invest in a very disciplined way. I want to conclude by taking you through the approach to the 5 year planning process. All businesses need a view of the longer term, and particularly on where the investment today is going to create licensing revenue 1 to 3 years afterwards. And then royalties 1 to 3 years after that. So the planning process has been a key part of on business cycles for many years. And there's an experience team running it. The process we've got in place is that this year is in flight as we finish at the end of the calendar year. That's when the board will be set in the 2016 budget and revenue target. I take you through how we build it up, it starts with the addressable market. You saw on the previous slide, we're very focused on where is the money, where should we be going? And what technologies do we need to address those markets. And a key driver of our success over time is a very deep and collaborative understanding of its partner's product roadmap, and our understanding has been built up over many years through a network of accounts managers around the globe. From those road map, we know what technology the partners need and what they're likely to take from harm. We know the licenses we've got signed, so we know the royalty rate. We need to take a view on market share shift what the size of the end market is, what the ASPs are. But the team have been doing this for quite a number of years. So we have a reasonable degree of confidence in the royalty plan that's built up. Definitely the trajectory, clearly, there are always ups and downs year to year, but we can be reasonably confident in the trajectory in the royalties. In the same way, we can build up the licensing plan. Again, we know the technology is We and again, we need to tend to check and bottom up again, the pace of consolidation in the business and the possibilities new entrants. And another really important outcome of this planning process is the ability to identify technologies that our paid partners will need in the future to meet their product road map. So it gives us the opportunity to identify, acquisitions to grow in organically to create new revenue streams by going into new technology areas. So once we know what the roadmap is, we know what technology we need to deliver, then Pete can work out how many engineers he needs to do to deliver that technology. Again, there's some marketing and business development heads there as well. And then of course, we need to provide the infrastructure for those engineers to do their job effectively. As with any other business, there are other operating costs associated with running the business. And I the management job and the CFO, myself, in particular, but the job is to control the other costs make sure that the engineering investment is done efficiently and it's focused on projects with a reasonable chance of success and a reasonable return. And so that we can continue to deliver sustainable and growing returns to shareholders. So we've got the revenue, we've got the cost, We've got an idea around the opportunities for inorganic growth, and that gives us a view of the cash requirements of the business by 2020. So what's your approach to that cash? The 3rd use of cash is to maintain a strong balance sheet, our partners need to have confidence that armed can withstand pretty much anything the world can throw at it. Arm is part of the R&D of some of the world's largest companies. Those companies need to know that army is going to be around, deliver on their promises, even in the work of circumstances. That strong balance sheet also gives us the flexibility in the firepower to take opportunities in organic growth as they arrive. So the second use of the cash is to reinvest in the business to create new growing revenue stream. In the last nine quarters, Arm have made 9 acquisitions or bolt ons. And as part of the planning process, we can see a pipeline of other bolt on acquisitions. Including some of the same sizes you've seen recently and a few larger transactions for future consideration. Over and above the reinvestment, we see the opportunity to continue to return cash to shareholders. We've got a dividend policy at the moment, but delivered a 25% CAGR in dividend per share. And I know there's been some discussions around Is there a possibility of future cash return? Hopefully, you'll see from the process that I've outlined that we have a clear plan to understand the cash requirements that's managed in flight. Once it's included at the end of this calendar year, then the board can decide whether it's appropriate to change that. So if I were to summarize the last 2 hours, Arm has a proven track record of investment guided by experienced investment strategy. We will continue to invest in mobile, maintain high market share and to increase our royalty percentage by adding more value to our partners. We're increasingly confident in networking and service and we'll invest in the ecosystem to accelerate and increase our market share gains, And there's a great opportunity in IoT, which is a market that's ideally suited to our low power tech, will invest to grow the market, will invest and maximize our share within it and will invest to create new recurring revenue streams. By 2017, the investments that we've talked about today will be delivering sustainable returns to shareholders that will grow from 2017 to 2020 and beyond. On that note, I'll hand back to Simon to Cherokee Unit. Just bear with us a second. We're just going to grab some chairs. Our team will be roaming the room with a microphone, and we'll get going. So as usual in these Q and A, if I could just ask that people ask the first question, we'll go around the room and then we'll read that It's Sandeep from JP Morgan. Just actually a quick question on licensing. You had, I mean, a teller run-in licensing for the last 5 years, you've guided now 5% to 10%. What is is there any change in the licensing environment, which is why you put 30% CAGR in terms of licensing over the last 5 years? Which was clearly in terms of broadening your market. Are there new opportunities to broaden your market here or it is now a question of maintaining existing markets and then harvesting from those markets in terms of royalty. Really always said that we expect licensing to be on a 5 to 10 ish range in the long term. We still believe that's the case. With the introduction of V8 with some of the other changes in the market, that did lead to much higher than that, the same licensing growth over the last few years. And that has taken our licensing revenue to a very high level, which we believe We can now maintain the growth of in that 5% to 10% range, going forward. The introduction of VA with a big step from the technology. We're in the process of developing processes, which implement version 8 of the architecture. We'd like to, what, 3 of those now. We have a roadmap that you saw, a more technology I think that's going to sustain us back to the more predictable level of growth. I mean, that's just would be on in terms of growth because you had a very strong licensing note over the last and say a certain, I think it was about 20% or 22% to a royalty growth over that same period of time. Do you expect royalty growth now for the next 5 years because of that very strong licensing growth to accelerate in an environment of slightly lower licensing growth. In terms of royalties we've built out today, it's part of the success of B8 has been the establishment of higher royalty rates because of the value that we've had. And coupled with Topgore and the success of our see that there is a scope or royalty continue to grow. We've spelled out in our outgrow the semi industry by about employee. We think that is valid. We think it'll be a right We're seeing the adoption of the 18 other markets. Revenues in the future that we've been further in the longer term, I think in that as compared to historically when you started investing in Maybe up to 3 maybe up. I'm also trying to understand longer term picture in terms. I think no is the full answer to that question. If you think about the instruction VA, if you think about introduction of new processes at that time line of creation of an architecture creation of the processes, the license being should be designed by customer, shipping, if all of that remains roughly 0 point what you're seeing here is, our approach to accelerating growth. So what we're doing is we're at some point where the conventional kind of process of the architecture product, implementation and has been running for some time from the success in that in the market, being at the opportunity to accelerate that growth. So to get off this the other look like that or the one that maybe looks like that through additional investments. Same story and think about the IOT, business that Mike has been describing is off the back of, process or architecture work or has done a long time ago. I said in my presentation, 2004, the birth was when we introduced what they think. So can you look at it for that way? I think what we're describing here is a difference that is focused on. Thanks. Good morning. It's a big change from you. I guess, I just wanted to ask on the network I guess you've got to come to the reality, we're only kind of 5 years away. So kind of where is this going to be coming that you can do quite a lot over the next 5 years? Working directly with roadmap. So each of those don't. I can point them. In behind them, right? But each of those dots we can point I guess it is an industry where you do quite often delays in terms of adopting new architecture, what extent will be baked into a direct Well, I think it comes back to the earlier point, right? The architectures are already deployed. We already have the minute there. We already have the product department already. Don't like re we're sitting there waiting for product to be developed. Goes through cycles. And that's why in impressive slides that what we expect in the near term and where we expect between, wasn't much detail of what might happen in between, despite it was coming up. That they're probably building to a concluded period, but from the technology development we've done, the life of being the chip that our licensees are creating. We think this market and then the engagement Bitcoin is about with the things that market is best to be a greater proportion of the product shift around Thank you. Back to that monthly chart. And I think historically you stated where they do market share from that particular picture, permit that way. But as you keep on growing market share, when you're incrementally you're going to take market share? There's internal development. Programs and then, of course, the ambition to bring to your ability to bring? Yes, if we're going to get to the server market, clearly. We will never tell you that there is no competition grant. I think one of the things about networking is it isn't just the case of replacing chips that are built today on one architecture. We've chipped built on the ARM architecture. What he described in his presentation was how the network itself is changing from something that connects the client device to a data center, to something which is a much more distributed computing factor. So the chips within networking themselves are changing. There is a discontinuity going on with a shift to a more software oriented network and that creates then new devices between seasonal opportunities as well. So some of this is greenfield, and some of it is an upgrade of, delivering more performance And do you have any certifications with the end interview to the network guide, I don't know, like, what the phoneword is it? Would you be a bit lost with the new, with the new architecture? Well, indeed, I mean, we absolutely spend time looking at people at various different points of the supply chain to get that view, there is no point in our looking at last rate. It turns out that actually the people that build the equipment on the adopted. So we by developing those relationships and that dialogue and use that information, Hopefully, make sure that we're in Thanks. I'm just trying to understand the set of incremental revenues. So would it be fair to say that the $40,000,000 several units. All of that would be isolated. Yes. That would imply that might be the standard to be the power And as we go into, 2020, specifically more even between licensing and royalty, is that the right way to think about it? 16 got 2 factors at play. 1 is incremental licensing. The other is the annualization of the revenue from the acquisition we made this year. I've put the number of the additional silicon that we're also bearing in network service, so I think that's a very good start. Calculating where that, you know, part of that 200,000,000 Eric, thanks for me again. So, I mean, the MVA device server is, is the software product It is recurring revenue, but it isn't quite the same. It might be the loyalty that. What it is driven on tighter deployment, number of transactions, number of devices, you could think of it as a as a royalty, but it has the recurring element because the same device made 38 subsequent transaction. One of the graphs that Chris had was how revenues have fluctuated as a function of the pricing that we've been through we kept our investments going. Now obviously in arm, we don't run factories, our investments in people. And trying to see if you need to. We've only really had to do that once in a material way in the history of ours, fortunately. And we have as cycles have come and gone, with a view to the future, continue to invest in those types of build trust. So, yeah, hopefully, we won't need to make adjustments as we go. That is the whole thing we believe We, we think, we have good confidence in the I got a question and concept that can you put already up here on the Jan. Concerning the OTTACO, we have seen indeed further collection media tech Huawei. On the other hand, if time your clients are using the custom picture? Now is there a new 8 20 in the either dual group, so 11 point think that we'll actually cut the market into maybe more efficient than within enough technology details and how they go on? What the rationale for your plan to eventually do immediately? To be honest, I don't want to get into that. I don't discuss what part of your There is a trade off in performance and patients. You can look at different benchmarks and in some configuration, some configurations work as another depending on what running and what you care about in your device. I don't think there is a right answer, but definitely being a trend to be more broad in many parts of the market, to enable more software to be done parallel. There's the kind of use cases of mobile to continue to evolve. Think, well, I think what we're going to see is different implementation, probably different markets. Mainly than wide reading? Not necessarily. It's going to be to do with, well, it's fundamentally about scaling performance and talent. Switch on more calls, deliver more performance, scale it back either in, if you've got a, being a set of calls or if you're implementing big lessons. There are many degrees, freedom. The great thing about our model is that we don't dictate what the answer is. Lots of people building optical, big level configuration, that's great. People building other implementations all based around on. And at this, we are taking what the answer must be. We are enabling innovation from lots of different companies and it's better than fantastic. I know you obviously dealt with your smartphone growth seems 7% CAGR. And you also touched on not being I need situation. How much of that growth coming from those, developing markets? How much would it be? I mean, there is a mixture. I mean, that that data is really the market data, it is the market How mobile is going to grow over the next few years? We don't have a fundamentally different view on What we are seeing is a lot of innovation going on. Stimulate, upgrade and Clearly, China is a big market, but there are other markets to be there. That comes through, whether it's very relatively low penetration today, full load devices are highly likely to contain, on processes or before bracket video, etcetera, with a broad range of technology to enable different points It's Lisa from Stifel. Maybe just a question to Mike, if you could just I just wondered if you could perhaps look for more boats on the potential transport. We look for a bigger software like the business but make that Are you looking to transform that base or something? I think as you look at the business going forward, it is all about, developing a service based software, the sales that go into that. Personally, data analytics is not somewhere where I'm interested strategy is to enable the cloud providers. So if you look at the most of the places that they're extracting value, it is around big data management and aesthetic. And I'm very happy for them to play that with more how we're able to get the data to them rather than just trying to compete with anything to do. Well, I'm interested in little data and make these available to more actually explain. Thank you. Look out for SSC implementation and process. Well, I'd say we have an investment in pragmatic. We've worked for operating as a medium term investment to seek to see where that comes. Thanks, Timan Smala from Deutsche Bank. When you talk about a doubling in mobile world by 2020, it's roughly a 15%. Talk about unit growth of 7%. So can you help us understand that delta a little bit that it looks like VA is pretty fully penetrated and affect the, then on the Oktaek World side outside of the custom board that approved both from it looks like you've probably relatively relatively well penetrated end of next year as well in O'Sali. I'm excited about the APO end. Adrino is due to be well penetrated also. So where kind of, how do you achieve outlook for me? Right? So we should think about higher margin or something Well, I mean, if maybe we can have the teamwork with you on some of the details of the mathematics. We can talk you through the Okay. Well, it's a function of more technology further by growing the licensing has been done, a lot of shifts are going to come out, likely they're going to come through to market. Might be rebates it. And if we look at okta 4 in the where do you think you can get to by 2020? Do you think? Same on, on Mali, really? I'd be very surprised if it's a 100% opportunity. There are choices of technology as I was saying earlier. What we look to do is to create a platform and then perhaps have people, our licensees make choices about what technologies they put together. It's a competitive space. There's a lot of innovation going on. Crash to me that we're going to achieve 100%. But I think thing over time. We're getting increased, what do you think you've come out at the end of this year in terms of Doctor. Let me take that over to you. I just had a quick follow on on the doubling in smartphone by the way. My question is how much have you tested that for what I think is If they happen in the industry, once that unit growth, those takes up 10%, they are decreasing competition you know, from the SCC vendors, I think we already talked about that. So how there is that scenario range, or do you think that at current pricing, current mix that that's going to remain a tailwind that can drive you on to that. You know, we absolutely build different views on pricing into that model as we put it together. So we do end up with a range and one of the dynamics that's going on in smartphone is there are merchants that make up the companies deploying the market. There are OEMs and sales building chips. That changes over time as well. So we don't just look at the merchant pricing to get a fleet view of It's changing. In fact, if we work with everybody in the space, but it's something that's, to your question, yes, we Thank you, Matt Renee. A couple of questions, one clarification, but And numbers that you're forecasting share for and not unit numbers, And if that's so, what does that mean about your unit share? Doing the dollars? And for the second question, I guess, what does that mean to imply about your Yes, the percentage is Sorry. The percent, so when you say 25% And then I, I would put the question then. What does that imply about the percentage share of the silicon 10 in dollar terms? Doming an ASP difference. It is going to be less than that, right? We assume that going into this market. If there is an incumbent from the server market, their pricing is relatively fine, Oh, what the obviously, the you made some great points, I think, within it. Yes. The key competitor there has made some pretty interesting their 3 d plus point memory that you are initial saved on that? Is that, a defensive move on their part? How are your apartment reactants? Thanks. Well, I guess the first thing I'd say is one of our partners in the network. One of the companies that I showed on there in terms of client And we're going to do that. When you look at the data center, the one size fits all approach is not what people want for the future. We have a number of our licensees who are looking at building, SOCs, taking the the methodology and the approach that they have used in, in lots of different other markets and applying that same methodology in the data center. So if you look at the Cavium chip for example, high score count cluster of ARM CPUs with various different accelerators, the difference in markets, and it's a combination of general purpose processing, and specific acceleration that produces an incredibly efficient, end solution. Now there's lots of ways of doing that. Combination of standard process or an FPGA, people have done that in many different conventionally. That's one way of doing it, building a complete FSP is another way of doing it, building the loan chip is another way of being lots of different ways of approaching the market, but I think the net of this is that combination of dedicated hardware with high performance price that gives you a more efficient way of for not for every application, but for many applications. A question on your opportunity in networking, I'd like to see your 2 income, but they are meant to be able to This is one of the largest vendors today. 670, it doesn't really move the dial. So is the opportunity here? Is most the market still on proprietary? Well, we are replacing this. We are replacing RBC So it's not just a crude. We're going after these particular competitors. The key point here really is about the way in which the network is changing. So we aren't thinking about what happened in the past do have that, what their financial model was, apparently, I don't care about that. What we think, and I believe that we have the right product lineup to address that, we have the right partners that we're working with on both the semiconductor side software to address this new market as we model that. We see a great opportunity for revenue that's dedicated networking. Yes. Yes. Elegance needs to grow. Will become programmed with a technology like to say that don't have a BBU, Thanks, Antonia from Credit Suisse. It on IoT. What do you think is going to be the biggest threat in terms of competitive point of view by pre microcontroller? A couple of other companies who can actually because your market share is still around 25%. I presume given the progress that you've made white the market share number to be as high as what lifting this month? The 25% you're talking about is that the way we've categorized the market so far is a microcontroller. The thing about microcontroller is pretty much the 75% very old 8 bit microcontroller that have been around for airbus. Co has been written for them. You know, they're they're shipping in China. What the Adventist will take aim as it has done is bring 32 bit processing performance into microburden. Mitigated software development tools, it allows for code reuse. And because so many of the world's micro companies that adopted project end, it means there's a lot of software engineering talent suddenly available. If you're building a product, you've got choice of supplier, that 25% is of that microcontroller market. Now those 8 bps products, we'll be shipping forever and ever and ever. So the chances of that going to 95% probably in our lifetime is quite small because it's a resilient in products that don't need to change and you don't need to change. IOC though is different. In IOPs, it's, it shows the numbers you can find reports on enormous numbers. It doesn't have to say exactly it's going to be other than predictable market. We think we're really well placed to have the right silicon devices for that market. And with the introduction of things portio, then we can add some of the connectivity to build the mesh network that Mike was talking about. And this software platform that we're building on top, We believe it's going to simplify connecting a device to a service. I'm not really going to worry too much about the services run. That's not our expertise. We want to keep the horizontal technologies that come across market. We're going to have competition in that space. You know, there is a lot of the code that runs an IOT today doesn't exist because the fact that IOT is very early stages of infancy. And there are other companies looking at this as a big opportunity. But I think the strength of technology, our business model, our retail system, follow-up on a question earlier, I think you're talking about 7% unit CAGR growth in smartphones. And you're saying that your services, at Sam would actually increase by about 9% that the ASP is probably going to go up. And why would the PSC application process of smart homes actually go up given that we are seeing a big shift towards low end Or does it actually assume that you're probably going to take some share in And the reason that we recategorized that market to include it all is because we think there is an opportunity there. And over time, then on the assumption that one of our licensees wants to go through the chip with that market, then yes, we can take some share there and yes, I would Andrew Humphreys. About mobile, today about doubling revenue. Like, sort of might be targeting talk about heterogeneous processing. We're thinking about different CPU than all our architectures to be able in this context but also with, with the accelerators with specific applications, you know, one way of looking at a video processor is it's a computing engine for a particular task. You can do video decode on a CPU but your battery won't last very long. It's genius. So that in terms of, are we changing our view on relative to effect or the volume? No, we're not. We would be great if we're in a position where we could be able to style up different royalties on a year to year basis based on growth, but we can't. We are gaining contractual We have, as I said earlier, fabric high royalty rates will be 8. We have potential to royalty from traffic video, the display, things like video time, but it's actually now Well, thank you for joining today. We cover a lot of material. And, we'll see you on the road, and we'll be back

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