Arm Holdings plc (ARM)

Analyst & Investor Day 2014

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May 20, 2014

Oh, well, we're very well behaved a lot to you. Good morning, everybody. My name is Stuart Chambers. I'm the non executive chairman arm holdings. I joined the board in January, things like ages ago, but it's not really. And I became Chairman on the 1st March. Been in the chair for 3 months. And with that position, I get the privilege of welcoming you all to Alms Analyst and Investor Day today. And also to introduce the session. This is the customary cautionary statement statement. I think most if not all, we'll be familiar with this. But if you're not, please refer to it. I believe it's in page 2 of your booklet. So this is our agenda for the morning. Simon's going to kick off and among other things, He's going to talk about how we gain share in our various end markets, how we build out our technology portfolio, and he's going to talk particularly as well the embedded market. Then Lakshmi will take over. Lakshmi is responsible for our service strategy, and she'll be touching on our progress in the server market and also in enterprise infrastructure. You'll then get a coffee break and then please stands up and Pete heads up our product development groups and therefore is responsible for developing and deploying most of our technology. That we have in Arm. And he's going to be talking among other things about winning in mobile computing, but also how we actually grow beyond mobile. And then Tim will talk about our financial strategy And we'll also cover, in addition, our investment in R&D And Growing Profitability And Simon will share our Q and A session, after which I suspect you'll all be very hungry, and we'll retire for some refresh So without any further ado, let me hand over to, to the executive. Thanks, Stuart, and good morning, everyone. Thanks for joining us today for, this year's, Analyst Day. I've been the CEO of Armow for almost a year, and I've had a great time in the last 12 months. It's been been really interesting, really exciting, getting to talk to lots of different people. In lots of different industries about lots of really cool stuff. Now the question I've got months has been around Arm's growth strategy. How is Arm going to continue to grow about 20 years of fantastic performance? What's next, how is ARM going to continue to grow? Well, I see that we've got many opportunities for growth. I'm really excited about what's going on in mobile and the potential for future growth in mobile continued future growth and the revenue opportunities that that generates for us. And beyond mobile, we also see other opportunities for growth in high volume high value markets. Now our business is fundamentally about embedding intelligence. It's about designing energy efficient and cost effective microprocessor technology and deploying that in pretty much anything we can think of, anything that moves most things that don't. And we see many opportunities for deploying embedded intelligence and having that help drive growth in our revenues, and driving arm to be a bigger and even more profitable company. So today, what we're going to do is talk about some of those opportunities. We're going to go into detail about some of the end markets. You'll hear that from my colleagues. What I'm going to start with is a more holistic overview of where we see these opportunities for growth. And then we'll go into some of the detail later. So starting with mobile, Over the last few years, we've seen a mass proliferation of mobile devices and through the execution of our roadmap and our business model, we've achieved around a 95% market share in mobile, which is fantastic. And you may think more 95% how does that grow from there? Well, actually, I think we're just scratching the surface of where mobile is going to go and what mobile can do. And although mobile phones are very prevalent. There are still billions of people that don't have them, and there's a big opportunity as cost is driven out of the N price of a handset to enable many, many more people to get access to phones and, in fact, mobile computers. Now the attributes that have made ARM so successful in mobile turn out to be useful in pretty much every other market, whether it's designing really small sensors or really high performance servers, low power energy efficiency, the ecosystem that we've built up around our company is equally applicable in mobile as it is in all of those other markets. And through the execution of our roadmap, through the development of the products that we've achieved and built over the last 20 years, We've seen arm processors used in more and more end devices. Everything from TVs to cars to motor controllers to this drives, we're seeing our processes deployed in a massive array of end equipment. And with that, there are new markets that are emerging, and we are leading the way in the new internet of market. Now the side effect of is the generation of data. And what we're going to see over the next few years is an exponential growth that is generated and processed and moved around. And to deal with that data requires structure that is capable of both dealing with the volume and dealing with the different types of data that we'll be moving around. It's not all about providing data into handsets. With the growth of the internet of things, it's about extracting very small amounts of data from sensors and broadcasting broadcasting it in a very efficient way. Now that data is going to get processed up in a server. It's going to get moved into the cloud, where the cloud computing will analyze the data at least attract information. And then in many cases, provide that information back to the user via their mobile devices, in most cases, or in some cases directly to other machinery in the industrial internet. So to deal with this explosion of data, it's going to require new architectures require new architectures in the cloud. And in all cases, to deal with the volume, we're going to need to enable all that technology to be built in the most cost effective and power efficient way just to deal with the volume. Now I believe that Arm Technology our focus on energy efficiency cost effectiveness on ecosystem makes us ideally suited to generate a solution for every point on that nature. And that's going to help us, grow our business as we generate more and more high volumes of ARM based silicon devices. Now let's go back to mobile for a moment. And over the last 20 years or so, mobile's been a huge economic driver. It's been a huge driver Street. And for us, the real discontinuity came and the opportunity came about with the advent of digital cellular, and particularly GSM, where armed 7 this processor that we designed many years ago now turned out to be a great solution for building GSM modems. Now over successive years, we've seen phones get much more sophisticated. From the basic ARM 7 based processes, we've added more and more processing capability as phones became more sophisticated with color screens and cameras and the first downloadable Apple patient, became available. Now around the, ARM11 and Cortex AA period, when phones really became smartphones. We saw handsets with a high performance, high bandwidth data connectivity into them. We saw color screens touch screens, and we saw enough processing power for phones to start to become really quite useful devices. And building on from there, around the Cortex A9 period and particularly when we introduced multicore cortex A9 devices, our smartphones became really mobile computers. They had enough performance in them that you didn't you weren't just using them for sending text messages and playing basic games, but they started to become really useful mobile computer devices. Now the growth of, mobile phones has been phenomenal. You can see on the graph on the left there that the number of subscription to cellular services has grown, pretty much exponentially. And there are now about as many mobile subscriptions as there are people on the planet. And the number of on the planet is something that continues to grow. Now although, there is many subscriptions our people, when you look at smartphones, there's only about 2,000,000,000 smartphones in circulation right now, which creates a huge opportunity to provide smartphones and mobile computers to billions more people. And we see that as a huge opportunity. And it's an opportunity that comes about because devices are becoming lower cost. It'd be great if everybody on the planet bought an $800 smartphone, but frankly, they're going to, that opportunity is only realized through the advent of low cost handsets. And that in itself creates a big opportunity for Arm because of the arm based content that can go into all of these devices. So this opportunity is enabled because not all phones are the same. Now I mentioned Cortex A9. And when Cortex A9 launched, and when we, delivered multicore, Cortex A9, it was the pinnacle of high performance in smartphone. It was the top of the premium sector. Over the years, what we've seen though is smartphones really kind of, stratify into different tiers of handset driven by different price points. And what you see on the right there is how the market breaks down in 13 between the premium, the mid range, and the entry level devices. And in all of those, different price points, what you see is a different mix of technologies, different mix of processing performance, different mix of graphics, different screens, different modem connectivity that enable the different price points. And across that entire range of technology, what we have is a processing solution that is matched for the performance level and matched with the price point. So we have a technology lineup that is enabling these different tiers of device in enabling the volume growth that is going to come. Now different tiers of this market will grow at different rates, but overall, this market is still going to grow at about 10% CAGR for the 5 years. And in most markets, that would be considered pretty healthy. Now within each of the each of these devices, what we refer to as a CPU subsystem. It's got a microprocessor, it's got graphics, it's got connectivity that allows these devices to talk to each other and talk to external memory and they're implemented in silicon. And when we look at those subsystems across the entire smartphone lineup, we'll as an opportunity for a cortex processor or a cluster of cortex processes, combined with one of our Mali graphics processes And then to implement that effectively in silicon requires our physical IP. And we have a lineup of technology called POP IP. It's all about optimizing the performance and the power efficiency of the processor in silicon. So through the combination of these technologies, we can deliver these different price points, and deliver the best performance with the lowest power. Was a growing market. And as we evolved our roadmap and our technologies, we've been able to grow with that growing market and help define the characteristics of that. As I said at the beginning, the attributes that we have in our products, this focus of low power and efficiency and building this ecosystem has enabled us to grow into other markets. And those other markets see the benefits of our overall business model. If we consider networking. So historically, Armint had a strong presence in kind of consumer networking in Wi Fi, hubs in home gateways, home routers, the Lauis Connecture DSL modem or your cable modem. But it's been very focused historically on consumer level devices. However, as the performance of our processes has increased and as we've had new technologies, with particularly the advent of Cortex A9, and Cortex A15, we find we're able to target a technology into the enterprise infrastructure into price networking and start to gain market share in what is a very valuable market from a chips that people build into these devices are quite different from what you see in a smartphone. What you see in a in an enterprise working device are many, many CPU cores processing data in parallel. And how those processes communicate with each other is very important, doing that in an energy efficient way very important because there's so much data moving around the chip. So to help address that need, we developed a technology that's referred to up here as CCN, which stands for a cash coherent network, and I won't go into the details of what that means. But if you're interested, we can talk to you later. But it's a key technology for allowing these very high core count processes to be put together and delivered in an efficient way. So by doing that by building on our processor roadmap, by building features into our processes, which allow them to communicate with each other and by building products like CCN that allow the subsystems to be together, we've been able to expand the reach of the ARM architecture and target this new market, which I said is very valuable space when you look at the silicon content. In embedded processing, again, we see something similar. Our licensees started building microcontrollers based on ARM 7, and as people started see the benefits of a high performance 32 bit processor in microcontrollers. And as they saw the benefits of the ecosystem them that Arm has, where we can provide third party IP, where we can provide third party tools, where people who use microcontrollers can source their silicon from a number of different suppliers, we've seen the opportunity grow. And as such, we've taken upon ourselves to create a family of processes specifically targeted at the embedded microcontroller space. That is Cortex M, and it's been a really successful product line for us. And I believe he's going to enable us to take very high share of servers. Again, some of our partners started developing server based chips, using our, CORTEX A9, in fact, the first based on Cortex A9 and then Cortex A15 as we deliver more performance. And these are, of course, 32 bit processes. As we've added, 64 bit capability into the ARM architecture with the development of version 8, we see a real opportunity here, and we're starting to see new devices coming from our partners, which we believe are really going to revolutionize the data center and meet the needs of the modern data center. So in all cases, we've started with existing technology. We've extended our product roadmap and we're continuing to execute to develop new products new technologies, which are going to enable us to further provide more value to our partners, now allow them to target these high growth markets in a very efficient way. So that all sounds great, but you may be thinking, alright, well, where's the money? Everybody's used to the value of the smartphone application processor market with the money here, because there is a misconception, in my opinion, that no market as valuable as application processes. Now when you look at this kind of in broad categories, we tend to kind of these markets together, group them together in terms of mobile applications, embedded intelligence, and then enterprise infrastructure. And when you look at the value of those markets, what you see is that today, each is worth about $13,000,000,000 And over the next 5 years, we anticipate roughly a 50% growth to for these markets to be worth about $20,000,000,000 in 20.18, So each of these is a very high value market. When we look at the silicon tam, this is the revenues generated from every chip that is sold into these particular market segments. And for Arm, there is an opportunity to generate a royalty stream for every chip that is sold into these markets. Have and the value of these markets is look at how and where there are some opportunities from technology. Going back to mobile for a moment. As we as mobile continues to grow, I expect that we're going to maintain a very high market share in mobile. Much of that growth, as I said, will come from entry level, low cost devices, And that is a good thing because there are many opportunities for ARM technology in those devices. And as they are adopted as more and more people get to use them, think that's going to have really quite a profound effect on society. If you give another couple of billion people on the planet, smartphones and all the data that we've become accustomed to is made available to everyone. And that will change people's access to health information, to education, and will have quite a dramatic effect on commerce in some of the poorest places on the planet. Now I think the side effect of that is going to be beneficial to everyone. We're going to continue developing our roadmap. We're gonna continue developing more and more high performance parts, but with that focus on energy efficiency. And so we expect to see mobile computing taking more and more different form factors, not just handsets, but we expect to see on processes used increasingly in clamshell form factors and hybrid devices, all enabled by energy efficient processes and high data bandwidth connectivity, cellular connectivity into these to the internet of things. And there are many examples here where the smartphone is being used for the controller of the internet of things. Many of the examples here are very humor driven for the same applies for industrial applications where data is going to be monitored in equipment and people want to make decisions based on what happening and the mobile device will become your window into the internet of things. What's shown here, a very first world example, net thermostats, parking sensors, which is a kind of great thing in the middle, Bluetooth controlled light bulbs. But going back to the growth of smart device mobile computers in developing countries, I expect to see new applications, which are specific to those markets. It may not be finding out where you left your car in a car park, It might be more about much more fundamental things about how you control the drip irrigation system that you have in your field. The Internet of Things, very linked to mobile, and I think one control in the other is a key attribute that will make the Internet of Things a successful technology. Now in Enterprise Networking, we have today a very small share, but that is growing. And it's growing because of the design wins we have with pretty much every semiconductor company who is providing silicon devices into this market, you can see the logos here, all of whom have announced products. And there are many other companies who are working on products, and many design wins which are going on. As I said a moment ago, the chips are different. Lakshmi is going to go into this graphic in the middle here in a bit more detail, but you'll see high core count devices And for every one of those cores, that's a royalty generating unit for ARM. As I said, the technology that allows these devices to be put together is really important And our customers are looking to us for more and more help for how to build these devices and get them to market quickly and allow them to that we are making in the ARM architecture, the investment that we're making in the ecosystem in the third parties that are providing complimentary IP It's that investment that makes Arm the Architectural Choice in many markets. And I believe it's why we will be successful in growing our share from what is today only about 5% or 5% 2013, to a much larger share, over the coming years. 1st design wins we're seeing today are around LTE. And LTE is obviously a very high performance cellular technology, but it's in its infancy in terms of rollout on a global scale. We're starting at the kind of radio end of of LTE, and we expect more and more on technology to be used moving in towards center of the networking core, and you'll hear more about that later. So we expect that 5% to grow, and we're really quite bullish about our prospects in this market. At the end of the network is a server. And I think the ARM partnerships made great progress in the last 12 months in making ARM based servers all the benefits of energy efficiency that come, a reality. Again, we have many of our semiconductor partners, building chips with announced designs. Some of them are starting to sample devices. You'll actually see some later. And there are many others which are in development. The chips are no good on their own. You actually need an OEM to build a product, and there are a number of OEMs who are doing that. And I'm to see units shipped towards the end of this year, real server boxes running real workloads in real data centers. Making that happen doesn't just require hardware, requires a lot of software as well. And we've put great investment over the last few years into building the ecosystem that's provide the software that will run on servers and make this low cost and low power advantage a reality. Again, you can see the logos here. It's been fantastic from across the ecosystem in building all of this software and some great partnership activities going on, especially around Leonaro that is bringing these companies together to help make all of this software a reality. So together, these components coming together, devices are being tested, and I think pretty soon, we'll start to realize the benefits that we can see from Revolution the data center. Now I'm going to talk about the embedded market, for a little while. Is just how diverse the end market is. The internet of things isn't one application. It's thousands of applications developed by thousands of different companies. Everything from big companies to individual inventors and innovators sitting in their garages, soldering things together. So it's a market that's very, very diverse, and it's enabled by the fact that the microprocesses, the microcontrollers that our partners are building are absolute tiny. We have examples where our partners are build chips so small, they fit inside the dimple of a golf ball. You think about that, it's absolutely tiny. And as a result of size. They're very, very low power. They can be built at very low cost. And that is a great thing because it's going to enable billions and billions of devices to be built and deployed in all sorts of applications. And I believe pretty much any company can benefit from the growth of embedding intelligence and the growth of the internet of things. We need to see companies, just to understand more about their supply to understand more about how their products are put together and have much greater control over their own structure of their own factory. We're going to see companies developing new businesses, new services due to the insight that they're going to get through understanding how their me that can become high-tech in some way or another. And a great example is the device shown here. This is a British Gases latest smart meter. Now, conventionally, you might not think of a gas company being particularly high-tech, but here in the K has been a lot of advertising recently, showing British Gas really trying to bring modern technologies to their customers. And the internet of things is one way in which they're doing this. Through smart meters, you can get much more information about how energy is being used, and you have the opportunity to control it and lower energy. And that is, of course, is something that everybody needs to be worrying about. So this smart meter gives you information about, use of your, gas, use of your electricity from you can make informed decisions. It's great example of the kind of 2nd generation IoT devices that we're starting to see, which are people really thinking about how users interact with all of this data that's being generated and how you glean information from it. Now this is a great example, but maybe you want to see historic trends, maybe you want us to anticipate what your energy use is going to be based on what the weather is going to do in a few weeks' time. Now to do that, you need to be able to combine data from different source And when that happens, I think the real benefit of IoT will be realized. And it requires a standard and properability between different providers and different gatherers of data to make that a reality, but it's going to happen. And I think we'll see many new opportunities for IoT from companies like British Gason, as I said, pretty much any other company you can think of. Now at the heart of the internet of things, or depending on how you look at it, at the extremities of the internet of things, are these really tiny sensors. And when you take any one of them apart, you're really going to see three things. There's a analog sensor, and there are a couple of digital components which is where ARM has a big opportunity. One of those digital components is the microcontroller that's taking the data from the center and making some sense of it. There is some form of radio connectivity that is taking that data and broadcasting it up into the internet where it can get processed. And for Arm, there are opportunities in the MCU opportunities in the radio where we already had, quite large market shares especially in the radio. And as this market grows, again, we expect to see higher and higher volumes of chips based on our technologies. Now one thing that's driving that is the popularity of our Cortex N series of processes. We've licensed this now over 200 to over 150 companies. Some of those companies have been long term existing arm licensees. Some of those companies have been new companies, taking a license to armed processes for the very first time, over 20 of the in the last 12 the needs of this very, very diverse market. And I expect that Arm will be the number one architecture in the net of things as all of these devices come to market and these companies start to sell of where internet of things devices can be used. You've seen the gas meter just earlier. There are examples in health care, in agriculture, in transportation, and energy control is one area where people are spending a lot of time looking at the moment. I have another example of that here. So this is a case, in, in this case, in, in New York, where a new law was passed to try and reduce carbon emissions, from all the buildings in New York, some of which are, of course, very, very old and have very, very old energy infrastructure. In order to make any progress with this, the first thing you're gonna do is start monitoring energy usage and then start controlling it. But do that in very old infrastructure. It was very hard. So there's a company here, bonded energy solutions who were commissioned to go and try and find a solution. They worked with a company called, electric. They're a U. K.-based company, who've built a Wi Fi platform based on Cortex's M3, I believe. And by deploying that, they're very low cost devices. This is actually their development platform that's showing on this SD card. They've been able to deploy this Wi Fi technology into these old buildings, start to gather data, start to control the sources of energy consumption, and have exceeded the requirements that were set down by this New York law. So it's a great example of old equipment being retrofitted with modern technology to help, clean information and then get control of something which is otherwise basically open loop. So there are lots of examples of this And the internet of things, as I said, it won't be the internet of one thing. It's going to be the internet of many things. And there are many people, companies like again who are building IoT devices. And if you really want to get a flavor for the kind of diversity, the kind of innovation that is going on, then I amend that you go and check out your local maker fare. Now this may be something you've never heard of, but maker is an organization who are, who's dedicated to enabling people to go and experiment with technologies and just go and build stuff and see what interesting things result. When you put inexpensive technology and software and cloud computing in the hands of pretty much anyone who wants to go and play with it. It's really quite exciting what's happening. And this weekend just gone was one of their biggest events of the year. They run a make affair in the San Mateo County showgrounds, which is an enormous place just south of San Francisco Airport. I went along, me and about 110,000 other people attended this for the weekend. I mean, VAR event. Unbelievable. And what's on display are things people are just building. They're taking low cost development boards. They're writing software, they're soldering things together in their garages and building things. And that sounds a bit bit hobbyist and some of it is. But some of it turns into real product as well. While I was there, I took part in a product launch of this board that's shown bottom left there, This is an Arduino development board. Arduino is an organization that was set up a few years ago to make low cost controllables available for at very low cost, these sell for, like $30. And the new generation of arduino boards are all based on on processes. And they've sold about 1,500,000 of these. So this isn't low volume stuff. It's pretty respectable volumes. And they're getting them out in the hands of people who go and experiment write software. They get, raise money off of a website like Kickstarter, and they make products. Now, this smartwatch I'm wearing from pebble started off as an Arduino prototype. They built they they used a LCD screen app when I was to cell phone, They hooked it up to one of these boards. They wrote some code and eventually turned it into a product that's gone into mass production, using an ARM process. So it's a great example of how this experimentation turns into real companies, real products. And there was just a ton of this on display. It's really fascinating to go and see. Is software and the cloud together. So I hope I've given you an overview of we see opportunities for growth. I'm really excited about the growth potential in mobile, and I'm also excited about the potential we see for growth in other markets. I've outlined here a number of high volume, high value markets where arms technology arms focus on energy efficiency on our eco system and cost effectiveness can bring a great benefit to ARM as a company. And I believe the technologies that we have are going to make ARM ideally suited to address the needs of everything that's on that picture. Everything from the smallest sensor up to the biggest server can be ARMpowered and we can drive energy efficiency up as a result of that. Now later on, Pete's going to talk a bit more about mobile. And in fact, late Ron from that, Tim's going to talk about a TAM of another semiconductor market that we didn't even go into here. So there is more to come as well. But before we get to that, I'm going to hand over to Lakshmi going to talk about enterprise infrastructure. Thank you. Morning. If you look at the word revolution in the title, you might think that we're and unfolding in the infrastructure space, and arm and partners are poised to enable the entire value chain to reap the benefits of this revolution. The cloud is transforming consumer behavior and driving new business models certainly driving technology. If you look at the clouds that are depicted here, you're showing public cloud companies like Facebook, Google, LinkedIn, and you also were showing some infrastructures of service companies that offer cloud compute for rent. Consumers are completely dependent on these public cloud services for example, my kids, they do their homework on Facebook and Google Hangouts because, clearly, meeting people face to face so last century. Businesses are also providers. So for example, Netflix And Comcast deliver services to a broad range of consumers using infrastructures service for their for their, compute. So a lot of these new businesses are actually dependent on the cloud for revenue and for their reputation. IT decision makers are also under pressure to be able to deliver these players services, in the financial industry, they're looking to be able to leverage the economies of scale that they see from some of these hyperscale cloud providers into a private cloud that they own and manage. But one thing is clear from all of this. There is a disruption coming in the ecosystem in the on open source software running on Linux. They're driven by community projects like Hadoop or Rita, as examples. And from a supply chain perspective, the hardware side, a lot of the cloud providers what they want to see in a server. And so clearly, they're driving technology into new places. So most IT decision makers plan to move a lot of their storage or web and email services to the cloud end user spending on public cloud services is expected to exceed $250,000,000,000 in 2018. And the resulting equipment spend on the cloud is expected to be around $80,000,000,000 in 2018, So you can see that there's so much revenue and services that have been generated from the cloud that there's a lot of innovation sure that's needed to be able to deliver these kinds of cloud services, to end users. And believe it or not, this is actually a simplified representation network infrastructure. Focusing on mobile infrastructure, actually a lot of end users are accessing services like Facebook, on their mobile devices. And so if you were in, at home, you're probably covered by your local macro base station that that's been deployed in your suburb. But if you were in a train, you would actually be covered by a combination of small cells along train route and their local macro cell that's covering that area. So over microwave link into an evolved packet core network and then eventually gets to the cloud. From a broadband access perspective, a lot of folks are accessing content like Netflix, at home on a tablet or, say, on a Wi Fi enabled TV. And typically, that gets routed through a Wi Fi router in your home, to a cable box or and sent into a carrier Ethernet network. On the enterprise side, we talked about a lot of price, CIOs looking to move some of their services to the cloud. But today, a lot of enterprises maintain their own data center. Users are typically accessing services within the enterprise campus using a wireless LAN infrastructure There is storage. There are also specific appliances, like security appliances that do Tusion Prevention, or content filtering as an example. And those are then, big they're connected using a local LAN network, which then gets connected into a provider into the cloud. So as you can see, This is quite a complicated, process or complicated deployment. And so in order to be able to address the service requirements and address the complexity here, people are looking more and more to adding intelligence at the end. So Simon talked about the exponential growth in data. And this presents some challenges for network operators and providers. We also talked about the billions of internet connections or IoT connections that are coming. And it really drives the network in terms of requirements for high performance, networking equipment. A lot of the operators are you looking to deliver a better user experience for their subscribers and, end users. What we've seen happen also is that a lot of the clouds are very much dependent on network performance for their end user experience. Cloud services are also increasing the amount of low latency traffic that needs to be serviced in the network. And again, that's creating a demand for high performance networking equipment. Stewal services, they need a lot of real time decision making. So for example, if I'm in Cambridge and I want to find my favorite pub or curry house, I look it up on my phone using Yelp, but there's a lot of data, disparate pieces of data that have to be processed and decisions have to be made in terms of what data presented to me, the end user. So you require more real time network management and decision making closer to the user. Operators are also under significant pressure from a CapEx and OpEx perspective. So they're looking for deployments that can scale to meet their needs but also allow them headroom in terms of, processing capability. So they're looking for flexible and yet standard processing architectures. Operators are also exploring initiatives like software defined networking and network function virtualization to be able to get up to a more scalable and manageable solution. And in fact, Armism is a part of the Etsy working group for NFV, and we're working with operators and the our ecosystem, on NFE. But these are all still quite early. It's still NFE and SDN are in the exploration phase. And operators are planning for it and exploring it, with various proof of concepts. Operators also want to be ubiquitous access to their end users. They also want to deploy application as a service. So for example, in a specific geography, if they want to be able to spin up traffic management services or security. Historically, when they had to do that, they had to deploy specialized boxes, which by the time they deployed those, they had already outgrown the capacity that those were servicing. And so they're really looking for flexible architecture that can get them to the next level. So what I really want you to take from this is that you're starting to see a requirement for more intelligence at the edge of the network. Operators are looking for scalable, but yet standardized processing architectures. And you're going to see more and more demand in terms of new applications that are being in new services that are being driven a lot from cloud based applications. So I want to focus a little bit on the mobile infrastructure opportunity and specifically wireless access. Operators need to be able to deploy solutions that range from small cell based stations or femtose cells all the way through macro cell base stations and then centralized radial act network, which are coming, in the future. They also need to be able to deploy different combinations of this equipment to be a to provide a better coverage across the network. And in order to be able to do that, they need unified approaches to software management, and they need instructions set compatibility all the way from the small cell up to centralized radio access networks. But there are a lot of complex protocols that need to be processed. And in order to be able to do that, they need heterogeneous processing capability. They also want to preserve their software investment going from platform to platform We're also starting to see them deployed virtualized applications. For example, in LTE deployments, they're encapsulating 2G protocol packets. To be able to, service legacy requirements. So operators need a variety of form factors. They need to be able to have energy efficient platforms to meet their CapEx and to meet their OpEx goals They need optimal architectures for these different kinds of processing that are happening, but all of that has to be underpinned by scalability. So the 2 major processing types that we see here are baseband processors and digital radio These are typically different silicon on ship form factors or SoCs. So in a small cell or femtosel, you'll see 1 to 2 chips going into each of these femtose cells or small cells. When you go to a macro station, you start to see tens of chips being deployed in each of these base stations that's going out there. And then when you get to centralized, to CRAN, going to be 100s of chips. So the kinds of cores that we be that we see in the configurations that we see being deployed in this space, we'll see 32 bit PORTEX A15 and A9s, in the small sell. And then as you start to migrate up in terms of performance requirements, we see various multi core configurations. So we'll see CorteX A53 coupled with specialized processing elements to do packet processing and other things. And then we'll see CorteX A57 doing the heavy lifting control pain processing. And in this space, we see it evolving all the way to 32 poor and beyond, especially when you start to get to price networking opportunity, there are a wide range of design points that are needed to cover the range of performance in these applications. So you have switching and routing, security appliances like I talked like I mentioned, in terms of intrusion expansion, intrusion detection and other specific appliances, and then, of course, wireless LAN infrastructure. There are 3 kinds of processing that typically, happens in these applications. So you of packet processing, which is the name implies, is processing the packets and the Halsted Network processing that's doing applications like network address translation, management and application process also sometimes in control processing. And there are various combinations of those types of processing depending on the box that's being deployed. So in a switching and routing platform, you'll have a pretty heavy on the packet processing and the network processing, but there will be some management and control plane processing. In security and appliances, it typically tends to be, more management and application processing. And then in wireless LAN, you kind of see a combination of all of these. So here, the SoC platforms that we see being deployed are going to be based on CORTEX A57, several CORT A50seven's and multicore configurations, to do some of the control plane functions, CORTEX A53, again, coupled with processing to do some of the data plane functions. And then, Cortex A57 in the security and appliances to do and these are going to be pretty heavy in terms of the number of the core counts to be able to do security and appliances. And then in the wireless LAN space, we see our cortex A15, coupled with CORTEX R and M Processors for the processing functions. So in the wireless land space, we see about 3 to 4 chips typically in each of the wireless LAN devices, in security and clients. It's going to be, you know, a couple of chips. But in switching and routing, depending on the process depending on the throughput that you're trying to service here, it'll range from a couple of chips all the way to tens of chips per, platform. Again, what you should take away from this is that there is a lot of intelligence being deployed in these systems, lots of complex processing, and clearly intelligence at the edge is going to be needed to be able to, service these demanding requirements. So what does this mean for the data center? We've talked about some of the cloud workloads that are emerging in terms of hyperscale deployments. This is really shifting the characteristics of the data center. Most of the bottlenecks that are seen in the data center are typically on the networking and side, not on the CPU side. Historically, the way data center operators were trying to solve these challenges was to scale up really go for performance at any cost. But now they're looking more at throughput they're looking at workload optimization, and it's really about performance per watt per dollar per cubic foot. And so they're looking at more scale out deployments with smaller and smaller course. A lot of these workloads are also based on Linux or open source applications, and it really opens up their ability to look at new and innovative architecture to help solve some of these challenges that they're facing. So let's talk about some of the workloads that are being deployed on our were planned to be deployed on ARM based SoCs. Most of the workloads that we're looking at from an ARM perspective typically about balancing CPU performance, versus IO and memory performance. Historically, that wasn't the case. It was kind of out of whack. So a lot of the applications that are going into the data center, they're looking at how do you balance that performance to achieve better overall throughput. So for example, one of the applications that we're showing up there cold storage, typically in that application, the CPU is idle 80 to 90 percent of the time. So you really need to spend more of the processing on the IO and the memory side. So if you had an integrated solution that had a storage controller integrated onto the you would actually achieve better throughput and better performance per watt per dollar. Now some of these other appliques like big data scale out applications, for example, you would look at a different kind of accelerator to be able to process some of those applications. So there are a variety of different applications where you might need different heterogeneous processing capabilities to get the scale and performance that you need. And also think about the fact that a lot of these mega data centers, as they called, are actually, deploying 100,000 and in some case millions of these servers. So the effect of optimizing for a given workload, and by the way, a lot of times it's print and repeat in terms of the workloads that are being deployed across these thousand servers. So think about if you optimize for a given workload and you are actually appointment across thousands of servers, it really amplifies the benefits that you can get from workload optimization and total cost of ownership. So let's think about how ARM is going to address the various workloads over a period time in the next 5 years. So today, there are several 816 core 32 bit devices using our Cortex A15 as an example seen core, 64 bit devices coming to the market focused on, service space. And our architecture can actually scale to 64 cores today. Over a period of time, I think through 2016, we're starting to see core counts increase where it'll be 16 to 48 cores. And then by 2018, we expect to see 64 cores as kind of this evolving sweet spot. So the workloads that are suitable, for the on solutions in the market today will be web tier applications like static web hosting or dynamic web hosting, cloud applications as a service. I already talked about storage. Big data scale out applications and offline analytics. As we start to get 64 bit software maturity, we will be able to address a broadest set of applications. So it's not just about software maturity, but it's also about our partners delivering solutions. So we'll be able to address applications like HPC, telco management as some examples. And then out in time, by the 2018 timeframe, we see a path to where we would be able to address enterprise server applications online transaction processing and applications like desktop virtualization. So SOC platforms are really enabling infrastructure revolution that I talked about. OEMs and end users are really wanting to deploy software defined platform. And for that, you need higher levels of innovation. You need flexibility, manageability, scalability and these need on to the SoC. So from the server space, what we're starting to see is that people are moving away from this one size fits all model and looking to add more specific IPs, you know, I talked about some of the accelerators that are possible with storage networking. We're also looking at, from a from a server perspective, people thinking about adding cloud workload accelerators as an example. The networking space, they're actually they need diverse processing capability to handle the complex protocol processing that needs to occur. But because they're wanting to move to a more software defined world, they're looking to the ARM CPU as an example of a standard processing architecture to where they can kind of marry the benefits of server class processing capability with these accelerators. So clearly, they're looking for scalable solutions. They need rapid integration of new IP to be able to deploy these as quickly as possible. So on provides the framework for, integrated SOCs. So We have our compute clusters, which scale to more than 64 cores. We have system IP, like the cache coherent network Simon talked about earlier. And of course, we have high performance memory interfaces and memory controllers that we provide But our partners are really able to rapidly integrate specific application focused accelerators like it could be network, packet acceleration, things like cryptofunction as an example, or in the in they could include GPU capability or DSP capability. And so they're really able to innovate around this ARM SOC platform. But one of the things I want to focus on is the fact that the ARM SSE bus standard, the amber bus standard is the industry standard for ARM based process serve. So a lot of 3rd party IP companies developed IP for the AMBAB standard first, because their market in terms of 100 of semiconductor companies developing IP for the AMBA bus standard is quite large. And so it really accelerates, the availability of IP for the partnership. So what does this really mean for the ARM Partnership? So AMD has been talking quite a bit about their ambidextrous approach. And Andrew Feldman, who's the GM and VP, of their server business unit, has been actually quite vocal about the the benefits of developing solutions with ARM, he talks about how it's a tenth of the cost and less than half of the time. But really, the quote says it all. So I wanna talk about some progress since I was here last year. So actually, last fall, we had several companies, announced plans for 64 bit, arm products, and actually moving to arm in general from some legacy architectures. You know, a lot of these folks were historically developing on MIPs And PowerBC, but they're now offering solutions based on the RM Architecture. So I'll Terra, Broadcom, FreeScale, and IBM announced their usage of the ARM product for, Net working and infrastructure applications. AMD announced their Hydro Falcon project, which is for embedded and networking applications and their Seattle processor, which I happen to be holding in the palm of my hand, for, server applications. We also announced the creation of open data playing, So if you look at the networking space, OEMs are striving to have a common software base and they want to be able to migrate from their legacy architectures. The open data plane provides a common platform for them to be able to do that. At Mobile World Congress this year, we had several partners that were demonstrating virtualized network applications. So we had t I, a t I cartridge in a HP Moonshot system that was actually coupled with software from our partner, EMEA, that was actually demonstrating a carrier grade management system for IoT endpoints. We also had a Vago LFI 16 core CORTEX A15 based Axia solution that was demonstrating a virtualized Evolve packet core applications. Earlier this year, we announced the server based system architecture at the Open Compute Summit where we had 14 companies including software companies and OEMs like HP and Dell that collaborated with our silicon partners to develop a standard that allows them simplify their software development and deployment on ARM server based systems. A couple of weeks ago, we actually had an event in Austin where canonical came and demonstrated their long term server product Ubuntu on the ARM 64 bit architecture. And actually, what was really exciting was that they demonstrated that 40,000 packages, had imported over to the ARM 64 bit architecture, and there were hundreds of applications that they demonstrated running on ARM servers. But the even more it phoning thing was it wasn't just about the applications, but it was about how easy it was for them to provision and spin up server instances using their juju mouse tools. A couple of weeks ago, Red Hat actually demonstrated on the AMD Seattle based processor, which is the one here, they demonstrated their server developer preview, on this product, and that also very exciting. We have partners like HP, Dell, and Mitek, that are poised with systems, and we expect to see additional proof points on things like NFV in the coming months, and of course, more news from our partners on their 64 bit efforts. So as I've talked about, the are several partners. You can see the number of companies that are investing with ARM for infrastructure. So we have a vibrant silicon system with a number of partners that you can see there. We have OEMs like Cisco, Nokia Solutions Network, Huawei and we have end users like Facebook that are developing on arms. From a software effective, you can see we actually have quite a vibrant software ecosystem as well with all of some of the partners that I mentioned earlier. And all these folks are working together to realize a really large opportunity from a silicon perspective, which is $20,000,000,000 in year twenty 18. So Arm is innovating with our the Arm ecosystem is innovating on multiple fronts. There are demanding requirements from networking and data center infrastructure and unique solutions that can scale across a variety of design points. Choices. So Arm's vibrant and fast ecosystem is really focused on enabling our partners to deliver to the demands of this cloud economy. Thank you. So we will have our coffee break now, which is coffee's next door. So please be back in 15 minutes to listen to Pete. I'm not gonna smile. Okay. You ready? Okay. Welcome back. So I'm going to spend the next half an hour, talking you through how we're doing in mobile and how we're taking the momentum we have in mobile and moving it into other areas. I'll wait until everyone. Okay. So our business model has enabled waves of innovation in the mobile space. What this chart shows you is the ramp of Simon talked about the early arm 7th, going into voice only phones, then we had the arm 9s, the arm 11s going into the feature phones and then recently the rise of the cortex in the smartphone. So you can see that we have moved gradually over time from the RMV4, RMV5, RMV6 architecture to the Cortech's RMV7 architecture. But that's what's enabling the smartphone growth. We have shipped over 30,000,000,000 devices or our partners have shipped over 30,000,000,000 devices the mobile space and we've had about 100 partnership in silicon. So a very good success story in the mobile space. And that continues. So CORTEX AM is getting widely deployed into IoT type devices. And some studies out there say there are going to be tens of IoT devices per person, 100 IoT devices per person. I've actually seen one out there which says that there are going to be 1000 IoT devices per person. So that's quite nice in terms of royalty growth. I think it's also very nice in terms of the kind of opportunities it's going to open up for us to call our own lives and get more data to see what's going on out there. We also have CORTEX are deployed in based on modem type technologies. So more and more, we're seeing integrated application processors consisting of a range of A class processors, R class processors, and N class processors. So there's multiple processors, power application processor chip from our customer And of course, we have arm V8A starting to deploy out there. I'll show you in a minute how that applies and how we see that deploying throughout the partnership and GPU compute. So both of those are enabling more and more compute capabilities, head Genius compute capabilities to go to mobile devices to enable new use cases. Now as we discussed earlier, smartphones are segmenting. So with any market, they're going to segment. So the high end premium mobiles, you can see about a 5% CAGR over the period, mid range mobiles taking off quite nicely. And then just explosive innovation at the entry level space. So Simon talked earlier about the fact that there are 2,000,000,000 smartphones out there. There are 6,000,000,000 mobile subscribers out there. So we have another 4,000,000,000 people to move to smartphones. And we can see that happening now. So we can see the less than $150 area taking off, we can see mass deployment out there and we could see some amazingly innovative technology in that space. I mean, at Mobile World Congress a few months ago, we saw the Firefox OS phone $25 to $25 in your hand and you have a full smartphone capability. So that's going to markets such as Latin America, Indonesia, and Africa And these markets or these new markets are not only mobile first. They're going to be mobile only. Five markets. So the mobile phone is going to be the only phone these people use. Wireline networks aren't going to get there. They are going to be mobile only. And what's happening is These are enabling new and innovative services on top of the mobiles on top of the smartphones. So anything from improving disaster a response through to mobile banking. I read one article the other day where it said that in some sub Saharan countries, mobile banking outstrips non mobile banking. So again, these are mobile first economies, even banking in those K is mobile centric. And then my personal favorite, I think Simon talked about the new and innovative applications. These are these types of devices are going to enable. My personal favorite is the medical tools in Africa. So a great example of that is using the camera on the smartphone to detect things like glaucoma and corrects in people's eyes. So really cool. I mean forget the money. Well, I shouldn't say that here, but really cool in terms of deployment and the benefit that it's bringing to people's lives. Now a great example of where the diversity that we offer with our business model has been exploited is China. So China, we have about 10 application processor partners, delivering silicon into China. We've got about actually 70 licensees in China Bob, I'm just going to focus on the application processor guide. So that's 10 partners delivering silicon into China. And what that's enabled is enabled local OEMs to have the majority of the market. So if you see the breakdown of the chart in the middle It's broken down in terms of the various suppliers. And you can see that local Chinese suppliers are the majority of the supplier into that market. So people like Xiaomi have gone up to 3rd in terms of smartphones or the provider of smartphones in that segment and they are expanding into places like Latin America. They're expanding into places like Singapore, Hong Kong and the UK. So our technology going in enabling local manufacturers, local OEMs, to take control of their market. And then a range of price points and form factors coming from that. So one particular semiconductor manufacturer or one specific semiconductor manufacturer. Based on one chip, we've seen 150 different price points and form factors coming from that one chip. So again, that's one chip from 1 semiconductor manufacturer. We have chips from each of those guys and we have more than 10 going into that space. So you can see a vast explosion of innovation in that space. Leading to tablets and smartphones at all different price points. And in China, that's mirrored by the ecosystem. So there are some logos up here. We have hundreds of ecosystem partners in China. Ecosystem partners ranging from game engine developers who are working very tightly with them to optimize their game engines to run on our CPUs and GPUs. Middleware providers where, again, my engineers are out working with them to optimize their solutions for the RMR architectures. And then app stores, I think a pretty interesting point here is there are over 200 different app stores China. So just think about that, 200 different app stores, a 1,000,000 apps per app store, all serving the local market. And all of the we're working with them to optimize that content for So another example of how, software optimization and software innovation is helping expand our reach is premium mobile computers. So you've seen recently things like Microsoft Office and Photoshop being ported to ARM based devices. So what this is doing is this is increasing people's usage or increasing business usage of those mobile devices. So over time, those will become the main compute platform. In fact, I think it wouldn't be stretching things too much to say that the PC you own now is the last PC you'll ever own. You can see that in some cases, 70% sales force users are spending all their time on tablet. And with the advent of these productivity applications, I think that just continues. Now these productivity applications are enabled by the new technology that we're putting out. So a new desktop class, CPU and GPU technology that we're putting out. And I think the graph at the top right shows you that interconnect connected mobile devices outstripped PCs and tablets in about 2013. So it's already taking off. It's already starting to dominate that particular space. And I think that just continues. Now these features are being introduced firstly at the premium end of the smartphone and mobile space. So if I take you through a little journey, I'm going to through a little journey from 2011 to 2018. So, the past to the future. So 2011, which is only 3 years ago, if you look at the premium devices there, they were JUULCOR A9. They were GPU enabled. They had color screens. They had a reasonable connectivity. And, you know, okay multimedia type features. So pretty high premium class devices. The mid range, we have the ARM11, so with the RMV arm11 devices, no GPU, really no color screens at that point. And then the entry level, we had the RMV 5 ARM9 devices. Again, no GPU. So that's only 3 years ago and just think about that, right? Mean, 3 years ago, we had a mix of architectures. Last year, we actually had moved everyone over to ARM V7. So, everyone had moved over from the existing architectures, we were consolidating on RMB7. And we've done that by a mixture of technology we develop and also extensive work with the ecosystem. So we have a lot of people going out and working with soft developers is explaining why the technology is great, what they can do with it, providing them with software enhancements so that they can move quickly. So this year, 2014, we have, RMV7A, octa core and X core devices out there based on A15 and A7. We have high end GPUs based on MAT760. High end connectivity and really powerful multimedia features. And you can see that the features from the high end have migrated V7A towards the end of the year, even in the mid range, they'll be based on V RMB8 to both arm at CorteX A57 and CorteX A53 designs, the same happens in the mid range. Happens this year. So VA deploys high and mid range this year. At the entry level, we're on RMB7. We're still on Corte a 7 devices and MALI 400, but you can see the entry level smartphone of this year has more features and more capabilities than the high the ASPs are remaining broadly flat. So the premium space SSDs are a $15.20 range, mid range, we're talking 10 to 15 at the entry level, they are $5 or less. But ASPs are remaining broadly flat because we're adding more and more technology to those places. And because we're adding additional orange technology to each of these spaces, our royalty percentage of those ASPs is going up. Now if we forward to 2018, we see VA going everywhere. So RV8 will go everywhere from premium and mid range entry level. So, by 2018, the entire smartphone and tablet market will have gone V8. And that's enabled by a couple of things. I mean, that's enabled by the fact that there is the demand out there for that. So for example, we can already see high end mobile games requiring 2 gigabytes of memory. And the big thing about 64 bit is it allows you to break through the 4 gig barrier. So right now, people on high end gain in mobile are on 2 gig. The gaming guys are demanding 8 gig out of heart out of smartphone. So gaming is already driving a move to 64 bit. That just continues. Funds. So we have the A57, ultra high performance core, and then we have the A53, which is a very case full core, but it's offered at a lower price point. So there are numerous 64 bit price points being offered. The entire market, I think, will go 64 bit in period. And it's not just smartphone and mobile. So as I said, gaming guys are demanding more and more memory. They're already and through the 4 gig barrier. That's going to demand 64 bit deployment into things like BTV, into set top box and into over the top boxes. We're also seeing users in those spaces demanding more performance and 64 bit gets you that. So we see 64 bit going everywhere across the mobile space and into the home segment. Now this, rapid growth in terms of mobile, in terms of deploy point is really enabled by mobile SFCs. So I'm going to spend a couple of minutes on those. I won't go into too much detail on those, but mobile SFCs are the most complex systems ever built other than humans, of course. They have billions and billions of transit and literally billions of transistors. They have tens of millions of lines of software in them. And if that wasn't difficult enough, the entire market is now starting to move at China speed. So by China speed, I mean that the timescales for concept through SOC to product deployments are getting shorter and shorter. So the SOCs are getting more and more complex software that goes on top of them is getting more and more complex and their time scales are getting shorter. So it's just more interesting. So what that means is we're being requested by our partners, not just to give them CPUs and GPUs and tell them to integrate sales. We're being asked to provide all the rest of the IP around it. So all the interconnect IP, all the memory controller IP, video, play and to make sure that all of that is tested, is optimized and is delivered to them. Fully. So they're relying on us. We're getting demands back particularly actually from some of the Far East customers to deploy more integrated solution. So we're doing that. At the same time, we're making sure that all our stuff works together, but it also has to work with all the IP. The customers are gonna around it to differentiate. So all the hardware IPs are going to add all the software IPs that they're going to add. So again, we have to make sure it works with that. And then all the third party ecosystem. So we have the widest and most effective ecosystem in the industry. And that's because we work at it. We have guys out there working with the semiconductor factors. We have people working with the EDA and third party IT guys. We have a ton of people working on the software ecosystem side of things, right? 100 of engineers literally working on the ecosystem. It doesn't just come free. We have to work with it. And I am not going to go through the slide in detail. I will ask questions later on what the VFS means, but I won't go through it right now. What this is trying to show is, As we deploy more and more technology, our performance goes up and that's great. But there isn't much more battery power left. So we have to keep energy usage flat. And we do that through a range of techniques, a range of techniques at the semiconductor side, a range of techniques in the IP itself, and then a range of techniques of software type. So the only thing I'm going to talk about here is our big little technology. So our big little technology has been deployed widely across partnership. And what that enables people to do is use a mixture of big CPUs, the little CPU. And now we're starting to extend that to all include things like the GPU. So you can now balance workloads and usage across fixed CPUs, little CPUs and the GPUs. And this just continues. So all the techniques we're developing have to be continuing if we're going to deliver that increased performance to people. So hopefully I'll show you how, the smartphone and tablet market is large and growing. It's going to go from 1,000,000,000 to 1,000,000,000 the period. The new technology that we're adding, the migration of features from premium to mid range to entry level keeps the ASP stable within each category. The fact that we're adding new technology. So new technology in terms of V8 over V7 in terms of graph in terms of video, in terms of pulp means that our royalty per chip increases over that period and combining those factors we can grow royalty revenue from the mobile space 15% to 25% CAGR. So that was mobile. Simon pointed out in the mobile space, we have added newer technologies. So we have everything from a 7s, behind out there's an A5, A9, A17, A53, etcetera. And we are continuing to add new and new more and more technology in that space to serve those particular markets. But we also have the same in the other markets. So enterprise infrastructure and embedded intelligence, we already have a range of technology there. Things like the A57, A57 was designed from the ground up to serve both the mobile application market and the enterprise infrastructure market. So it has a number of features in it, which are incredibly useful for enterprise infrastructure and actually aren't being used in the mobile space there. We continue to add new technologies in those space. Alexmi talked about our CCN networking. We have new tech technology coming in enterprise infrastructure as we engage more and more in that space. And then embedded intelligence, there's just so much to talk about. I think we'll do the break, but we have a range of microcontrollers in that space. A5 and A7 are becoming the de facto standard in wearables. And clearly, we have all the real time controllers as well. And what this means? So the new markets we're entering and the new technology we're deploying extends our license opportunity. So what you can see here is gradually over time, the CORTEX and Maui license dominating the chart. So a falloff in our classic Processors, but CORTEX, sweeping everything before it, And then, in the new market areas, last year, we had a number of companies in mobile computing, taking both our Cortex A-fifty series and Melody 700 for mobile computing. We had 10 licensees of Cortex A50 or Cortex A just in the enterprise networking and service So not mobile licensees, but guys who are taking our technology specifically for enterprise networking and forever. And then embedded intelligence, we have a whole bunch of existing customers, but 22 new customers in that the customers that were new to Arm taking M profile, largely for MCU and IoT devices and for low end wearables as well. So, license opportunity extending, what you can see along the bottom is, RMV88 licensing. And it's gone well. I mean given the amount of time and effort, my boys and girls invested in it, I'm glad it went very well. We're up to about 44 licenses just now, which is great. But I think we have a lot untapped. So you can see our RMV7A were about 150 So a lot of additional potential licensing to go in RMB 8. And that's existing markets, let alone new market. So I'm going to spend a little bit of time just talking through the licensing options we have. We have a range of licensing options largely because we have a range of customers. We have everything from the very big multinationals with multi with multiple divisions all the way down to new startups Simon was talking about the guys at the maker fair, so very small start up. So we have a range of license options. I'll cover architecture licensing in a minute Ditto for subscriptions. Perpetuals are largely for you know, large companies who want access to the technology for multiple design. So they get access to the tech, they can have a core tech safe 57, perpetual license they can do as many designs as they want forever. We do term licenses largely for mid range companies So companies who want to access the technology for 3 years or 5 years. Again, they want to do a number of designs around that. And then we do quite a lot of single use licenses. So those are, as I said, the startup, the guys who go, I know I can do one chip, I want the technology. I want to build a Jiran arm. I want to access the technology for that one single design. So quite a lot of single use our licenses. And you can see over time, a lot of those guys expand up, as they get successful. But if I cover 2 of those license types in particular, so if I go through architecture and subscription, these are both examples of where partners want long term ships with them. So they don't want transactional relationships. They want very long term relationships. Architectural license The great example of that, that's where customers get a license to our technology so they can build an ARM compatible processor. And the reason they're doing that is they want access that that ecosystem, the ecosystem I talked about, all the software, all the tooling, all the third party software that runs on an ARM process. So they want access to that. And they want to So they want to do something which we'll probably get to in 3 to 5 years when the market develops. They want to do something like that now I should note that all of these guys have to pass ARM certification. So they're getting access to the ARM ecosystem. That's the value they get. We have to make sure that they enable the army system when they run on the army system. This is really only for very large companies I mean, the license fee itself is large enough. But the engineering investment they have to make on their side is enormous. So they have to put up complete CPU design teams, validation teams and pass all our qualifications. So it's a very, very large investment for the license fee. I think the other thing that's worth noting about this is the royalties that we charge architecture licensees are broadly the same as if they took our own CPUs. So you have to do a very large investment and your royalties are still going to be the same. I think it's also worth that most architecture licensees do deploy armed CPUs around their exist their own architecture core as well. So you'll have a large architecture licensee core, maybe in the middle of the SSC and then ARM implementations around it as well. The other area where people, are engaging for a long term relationship, it's a subscription model. So subscription models enable customers to take access to an entire range of armed technology over, say, a 5 year period. We segment it so we can say, you know, you did have all armed VAT high end processors and anything that we come out within that period or all M profile processors or all MALI GPUs And you can see here there's a range of customers we have up here, who have taken access, subscription access to our CPUs. They're quite a few of them have also taken access to our Melee GPUs and increasingly now some are taking access to our PULP IP. So it's a very good model to get long term access to technology. It gets passed the project going, well, I need to know I'm core, but I'm going to have to go and talk to purchasing and it's going to all be very difficult too. Well, actually you have everything. Once you sign this, you get access to all the ARM technologies. The design ins are really easy. And our relationship with the customer, the engineering teams the customer just changes dramatically. So really good things. So our licensing base continues to expand. We've added 1 to 2 subscription licenses per year. And of course, we have renewals that go along with that. I think the other point that's of particular interest to me is 25% of our processor licenses are with new customers, but new customers to Arm a quarter of our licenses are with them. So that's quite interesting. And that's because we're licensing nontraditional customers. So not just the semiconductor guys, but OEMs, software companies, service operators, etcetera. So, how do you know oh, sorry. Licensing, I think, for us, is a precursor for future royalty growth. So this chart is really showing you how cumulative licenses of cortex have taken off and then a few years later, you can see the unit shipments. So we really see licensing as a precursor for future royalty growth You lost a bit a few years later, you're going to get the unit. In terms of V7A deployment and V88, you can see that they're moving at more or less the same cadence. So from processor licensing to 15 licenses signed for 1,000,000 reported shipments, about the same V8 as V7. I personally think by 2018 V8A shipments will have exceeded the 2,000,000,000 units. So that's what we did with V7A. We have those 4,000,000,000 other smartphone guys that turn over as well. So hopefully in that period, we'll have time to move So, we talked a lot about licenses. We do 20 to 25 licenses each quarter. What we try and do is show you in the analyst community how important some of those licenses are and we've been doing these charts the last 3, 4 years. What we do is we say, is that we'd have to enable with ARM Technology in order for us to get an 80% market share. So we do these at each earnings announcement This is what we had in 2010. So in 2010, we had 37 guys shipping mainly ARM based chips 15 shipping some ARM based chips. The rest were largely based on their own CPUs. And then 23 guys who didn't have any design wins, weren't public, didn't want to use our technology at all. So that lot of customers got us a 25% market share in the CPU space. Since then, we've added new customers because we have enterprise networking, we have IoT, we have wearables, So we've added a number of customers that we're tracking in that space. So we're now up to 100 different entities. So either companies or divisions of companies that we're tracking. And you can see now we have about 40 shipping mainly arm based chips and only 17 who don't have an arm design win or arm public. So that set of customers gives us a 35% market share. And you can see that in Q1, we announced that some of those reds turn color. So, AMD and freescale announced their plans. We do also have another 2 who we know are migrating to arm based designs, but it's their secret. I can share it with you. But we've got And I worked that out in my head, 87 companies now moved out of that 100 moving to Arm. If all 87 customers executed on their plans or their plans to deploy our technology, then over the period, we get a 70% market share. So we grow from that 35% I talked about in 2013 to 70% over the period. But of course, those 13 are very important. They're very important to me. They are 10% of the market, but they are very important. My job to turn those guys over. So I'm working very closely with them to determine the right time for them to adopt ARM Technology. I don't think there ever is not a right time for them to adopt our own technology, so it's just a matter of time. And we do my job properly. So me just summarize. We expect mobile devices to continue as a major revenue driver for us. We've got a high share of a growing market, ASPs, due to deployment of new technology are staying stable. Our royalty percentage because we're deploying additional technology is growing over that period. We're well set up for markets beyond mobile. So Lexmi talked about enterprise infrastructure and service, but also consumer electronics embedded intelligence everywhere. We are getting a lot of partners who want longer term deeper relationships with us. So I think that's great. And we have the models to enable that. And the new IP that we have continues to attract new customers and new types of customers. It's all good. I'm done. I'm done. Okay. So thank you we're listening. I think I'd like to invite Tim up for his, last investor meeting. Okay. Good morning, everybody. The, good and bad news, depending on how you do it, this is definitively not my last investor meeting. And in fact, the announcement of my demise in 12 months time, which was actually made on 1st May already feels like a very long time ago. As usual from now until early next year. So you'll be seeing a little bit more of me yet. So we've heard a lot this morning from my colleagues about arms extensive opportunity both in mobile and in new markets. We've been introduced to a little bit of depth on some of technology. And I think what I'd like to do now is just sort of pull the threads of that together from a financial sense. Because I think I know that that is something that interests quite a large proportion of this audience. So that is what I will seek to do We'll have a quick reminder of sort of where we are on our financial journey, 23 years into the project, if you like. And then we'll look at drivers of license growth, drivers of royalty growth, not going into huge detail because I think Pete has touched that and we've a lot of detail of the markets. How our investment needs to change or not to access this opportunity and what that will mean for profitability margins, cash generation, turns to shareholders in due course. And that's what we'll look at over the next 20 minutes or so before we go over to question So a very quick reminder, this is the 2013 P and L. It's a snapshot. I don't want to go through it in detail, but I think suffice to say, you know, license revenue makes up 40% today, 23 years in of arms total revenue, royalty is 50%. I personally find it very encouraging for the reasons Pete was saying around licensing is a precursor to royalty. I find it very encouraging that license revenue has grown more strongly than royalty revenue in the last 3 to 4 years. I think we will in due course revert to the more normal relationship growth between licensing and royalty as we look forward and we'll touch on that later. But I think this bodes very well for our medium long term royalty opportunity that license revenue has grown so strongly. If you looked at this P and L about 3 years ago, actually royalty was a higher percentage of total revenue then. That it is now, which is very good news. From a margin standpoint, the business is obviously moving close to 50%. We'll look at how that's developed over the years, but suffice to say 3 or 4 years ago, it was in the early 30s. And I'm sure most of you are aware we've gone through quite a long period of investment, probably higher than average investment by armed standards over the last 3 to 4 years and yet the margin is increasing in that time. And we will understand, I think, the R business model in here the drop through from profit to cash is fast and it's pretty much one to one. So we'll talk a little bit about how we plan to manage the cash going forward as well. Where we are on the sort of market share gains, we've looked at a lot of the individual market opportunities. This is a chart that we share a lot with investors when we're on the road. It's a good way I think of gauging how Arm is building market share time across the whole spectrum. And what you can see on the bottom right there in 2013, our licensees shipped a total of just over 10,000,000,000 arm based chips. That represented about 35% of the total embedded processor opportunity we think last year. And you can see from the little table on the right that that 35% has been growing fairly relentlessly at 2, 3, sometimes 4% a year over the last 6 or 7 years. So the share has broadly doubled. So that's kind of where we are based on what we've done the semiconductor companies to those companies we have sold over 1000 licenses. That's where we are today. Most of this morning we have concentrated on, if you like, the big 3 mobile application processes, enterprise infrastructure, and embedded. And I think you can see that on the mobile side, it's high share We expect to maintain a high share in that space. In enterprise, it's a big new opportunity for us. We have a low share currently, but lots of room to grow. And similarly with embedded a relatively low share just over 20%, but lots of opportunity to grow. There are other markets. You know, Simon mentioned this. It's about layers of growth. It's not just all of our applications processes in mobile. It's not just about the emerging opportunity in enterprise. We have been working very hard now for multiple years in segments like automotive and making steady progress, which we think will continue. Similarly, in the wire connectivity space. There are apps processes in many other end markets, not just smartphones and tablets. And then there are a series of other markets. So, yes, its layers of growth, these markets shouldn't be ignored, but we focused clearly on the slide. So thinking about licensing, if you look back over the last 10 years has kind of been 2 phases. There was a phase before the downturn where arms license revenue was growing at high single digits, 9% compound up until 2008. Since the downturn is growing at 19% CAGR. And in fact, I mean, if you took that number from 2009 where we know went down and arms licensing went down a little bit as well. It's been even stronger than that. So what we've seen in the last few years is much higher than trend growth. And I think that's being driven primarily by the fact that arms addressable market as we've heard this morning has been broadening. And this has given the opportunity for our licensees, not only our existing licensees to deploy to companies, both at the low end, if you like, in the embedded space and towards the high end to license arm technology for the first time. ARM is at one level an outsourcing business. So the higher cost, the more the complexity that our partners would have to be spending themselves. The more fixed cost we are saving them, we're replacing it with lower variable cost, but they recognize the cost and complexity grows, our pricing will go up. Our license fees go up over time. The royalty percentage per chip goes up over time. That has also been driving the licensing growth in recent years. And as Pete said, RMV8 has been a big growth driver, but it's in the early stages of its overall licensing cycle. So much more to come. Those of you who have talked to me about the arm opportunity over the years would know that I consistently say that in the medium to longer term, expect license revenue growth to normalize back to the rate that we saw before the downturn. We've had an acceleration. We've had a rapid broadening of our addressable market because I think as we move to steady state and we update the next generation by end market, we think it trends back to about 10% growth for licensing. Looking in a little bit more detail of what's happened in the last few years, I mean, the very good news about arms licensing is that the backlog has grown much faster over the last 5 years than license revenue. Now backlog in Arm world is contracted revenue. This is not some sort of discretionary pull down that we may or may not take. License revenue that's been contracted but has not yet been recognized as revenue. So backlog finds its way into the P and L over time. And what's driven the growth in the backlog over last years is a combination of the subscription licenses and the architecture license is that Pete referred to, which are by and large, recognized on a ratable linear subscription accounting basis. So when we sign 1, the backlog shoots up and as that license is recognized over the duration of the license, the backlog is down and then most of our licensees who use this type of model will then renew. They'll either take an architecture license to the next architecture or they will renew their subscription and the backlog goes back up for that customer and then it is down again. So that's been a big driver. But also version 8 of the architecture has also been a big driver, because you know, big semiconductor have been licensing that technology whilst it's been in development, normal arm lead partner licensing, and that revenue goes into the P and L over multiple quarters. And that's what we've seen. So one of the sort of underpins, if you like, of license revenue over the next few years is this major growth in backlog unwinding into the P and L. And looking forward, as we transition from the 19% license growth that I showed you earlier to the 10% that we think in the future, As we transition there, I mean, what we would expect is that the backlog stays broadly around current levels. Now clearly in some quarters, it's going to go down. In some quarters, it's going to go up, but we would broadly expect the back to stay around current levels as we look forward. So switching to royalty, What is it that's been driving arms royalty growth over the last 5 years? Arms royalty revenue has broadly doubled over 5 years. It's a combination of some industry growth. I mean, I think in this period, which obviously includes the downturn. Industry growth has been very modest, the 1.5% CAGR. Most of you in the room would know that in a decent year, the semiconductor industry is growing maybe at 5%. That's a pretty decent year these days. Typically will be in the 3% to 5% range. But over this period, if you like the tailwind that armed royalties have had from the industry about 1.5%. Layered on top of that, obviously had the share gains that I showed you earlier. And we've also had the increasing percentage per chip that colleagues have talked about as more armed technology has been introduced into these devices. 15% higher than the industry. And for all the reasons that we've been speaking about this morning, we envisage a world where performance continues. As I growth in the industry, we would expect arms royalties to grow at about 15 percentage points ahead of the industry looking forward. One subject that we talk a lot about to investors and to some extent, to analysts, is the average royalty per chip. Because there is a sort of a general sense that a number like average royalty per chip going down is a bad thing. That may be the case. It may not be case. I mean, I think if you think about the broad spectrum of end markets and chips and chip prices that are being designed into, I think you can quite easily quickly understand that this is really all about the mix of the different growth rates of ARM technology. And you can see in the last 4 years that the average royalty per chip has been flat slightly up as the positive impact of, as it says there, on BA high royalty multiple processes increased Marley penetration driving the average up. And driving the average down would obviously be arms penetration of very high to happen going forward as we would break into the market that we've been talking about. I mean, let's look at call. If all CORTEX A family processes last year had been version 8, I. E. Same number of shipments, but they'd all been version 8, then the average royalty per chip would have been about $0.06 across the piece. If, which would have been good news financially, if arms processed a share in microcontrollers had doubled in $4. Not a bad thing. All royalty revenues are 100% margin. Don't forget. If both of those things had happened, low and behold, the average would have been $0.048 but the royalty revenues would have been much higher. So I think we've all been delighted at many more royalties, same average per I think we need to be very careful when we sort of assume that average royalty per chip going up is good and average royalty per chip going down is bad. Not necessarily the case. We are in business here to grow our royalty revenues as fast as we can. So let's switch a little bit to investment. I think it's no coincidence if you look back over the last few years, we have been going through, as I said at the beginning, an investment phase. We've been increasing our headcount to arm, both in our R and D team and in our business infrastructure more quickly in the last 3 or 4 years than we have in the periods before that. And I think part of that is growth But a lot of it of R and D have grown at a similar rate, I think is no coincidence. I think when we look forward to a world that I'm painting where license revenue grows at about 10%, then I think what we will see is our investment in R&D, the growth rate will also moderate as well. So the underlying operating leverage in the model continues to play out. And I mean, in summary terms, looking back over the last few years. As I said, margins early 30s to late 40s and our earnings over the same period have grown at 29 percent compound and the cash flow has grown from there. Normalized cash generation has grown at the same rate as earnings. Like many tech companies until 2003, we were a cash collector. The more cash we had, the better we were. We then started to think about balance sheet management, capital structure management. We introduced a dividend back in 2004 for 2003. We introduced a buyback program and we deliberately managed the cash of the business down to about 50,000,000 quid by the end of 2007. And then when the world started looking over the precipice, in 'eight, 'nine, we very deliberately allowed the cash to build because apart from anything else we wanted the business even in a really, really difficult cycle to look very robust in the eyes of our customers and our investors. So we haven't done any buybacks until recently. Since the fourth quarter of 2008. And really we've been focused on the dividend, which has grown through the cycles, including through the down earned when it grew 10% per annum and has grown at mid-20s and sometimes higher in recent years. The result of all that and we confirmed again in February that our intention was to keep the share count flat over time. It happens because of that buyback activity in the0508 period, share count is flat now relative to when we started that buyback in the middle of 2005, And we said in February that we intended to continue to maintain that flat share count and eagle eyed observers will have seen us in the market in the last week or so buying back some arm shares. This is not going to be a major buyback program. Going to be a limited buyback program with a view to maintaining a flat share count over time. But clearly, given that it is a fairly buyback, we don't need to be doing that particularly fast and we can pick our moments. So in summary then before we move to questions, what does this mean for the future P and L? I mean, if you look back over the last 5 years, what has happened, license revenue to grow in at 'nineteen, royalties at 'seventeen overall revenue of 15. OpEx as we invest to seize the opportunity has grown at 14% and the as you see up close to 50 percent now. Earnings and cash we've talked about and dividends. Where does this go? We see a world of 10% license revenue growth. We see a world of royalties growing at 15 percentage points above the industry. And we see a world where operating leverage continues to be part of the model We don't manage the business. You've heard me say this many times. For short term margin, we want to see the growth opportunities have, we're in business to grow profits, to grow cash, and the margin in a sense will be what it will be. But in this model, you've seen what's happened to in the past and we see no reason why operating margins don't continue to expand, notwithstanding investment opportunity over the next few years. And I think a combination of the revenue growth, the margin expansion and the reducing tax rate that we've talked about as a result of initially R and tax credits more recently, the Patent Box tax regime, these are all quite strong tailwinds for Arms earnings growth. So I think that is going to lead us to growing profits, growing cash. I think you can expect arm to increase the payout ratio of the dividend over time. It's been about 30% historically. I think there is room for this business both to increase that without in any way inhibiting our ability to access the growth opportunity. So I think you see that in combination with maintaining the flat share count is how we manage our cash. We don't plan to build a huge cash pile. Therefore, if a combination of those two factors is not sufficient, we will do some other form of return in due course as and when appropriate. So with that, I'll hand over to Simon to chair some Q And A. Thank you talking to chairs, we're just gonna reconfigure the stage here. I'm gonna, ask my colleagues to, come up on stage, but Tim gets to go too far. And if I could ask when we go around the room, if people just ask one question to start with, and then we'll get around everyone, hopefully, and then, be able to come back for more. I can actually just state your name and where you're from? Yes. So I'm Francois from Morgan Stanley. There was a slide showing that in 2018, all smartphones would be V Eight. So 64 bit. Very interesting to have this target now. Do you expect to be at the royalty rate to be like a linear progression overall from the 1.5% today to actually what could it be? That's my question as well. What's going to be the royalty rate for everything going to V8 or 64 in 2018? That's my question. Well, I guess the total royalty per chip is going to be based on the number of cores, whether or not there is Mali attached, whether or not our physical IP is in there. So there's going to be some spread of that. In terms of the linearity of that, I would it's a bit hard to say. I would think we'll start to see, you know, slowly through next year, you know, growth of more devices becoming VA. And probably, I mean, you're probably right. Probably quite a linear progression towards, all phones being V Eight. I mean, it's going to trickle down from the top. Pete showed in his slides how logy moves down. And I think as more and more software gets written for the top of the market, it is going to drive acceleration, into the bottom of the market as well. And what about the other Cortex A users like set top boxes or TVs because there is probably less need to have, VA for power consumption. Is that 20 as well, or is it going to take longer? What's your best guess? I mean, I know the one knows, but it's really your guess. I mean, I think there's going to be a very long term market for 32 bit ARM Processors in the same way that 8 bit micros still ship today and we'll probably still be shipping when we've all gone to our graves. I think 32 bit micros are going to be shipping for a very long time, not all markets, need that the power of 64 bit processing, not all markets need more memory than 4 gigabytes. So in some cases, it'll live on for a long So I'd agree with that, but I'd also say things like home, they are going 64 bit. Things like DTV set top box over the top boxes are going before bid and they're going 64 bit fast and they're going 64 bit because they need access to more memory and because they need access to more performance. So we can already see partners deploying 64 bit specifically into those markets. Thanks. Achal Sultania from Credit Suisse. 1 of the key drivers for your royalty rate increase is going to be adoption for regulatory technology. And when I look at the chipset vendors for smartphones, 2 of the biggest vendors aren't using big little right now. So what gives you the that, those guys are going to use big little at some point, whether it's a question of those guys hitting some sort of a barrier in terms of performance at some point or it's just a question of you improving further on your existing on your existing vehicle technology? Well, big level is an example of multicore. One of the things that helps drive the the total royalty per chip is the number of cores that are in Big level is one way in which more cores can be used in chips, but it's not the only way. I think we'll continue to see more cores being deployed or many cores rather being deployed in these devices. Now the overall uptake of Big Little has been quite strong. More people are using it now than there were 12 months ago when we were sat here. And I think we'll see continued upgrades of that or increased use of Big Little, driven by the needs to lower power and the adoption of the technology will be driven by our execution on the roadmap of CPUs and so on the software that helps, really maximize the benefit of big level for anything on that? No, that's exactly right. I mean, the the big challenge has been getting the software there. The software has been deployed. Quite a few partners are applying it, even I think some of the big smartphone guys you talked about are deploying it now. Good morning. It's Nick James. Sorry, Nick James from Numis. Just thinking about the embedded process for opportunity in the internet of things and complain that to the potential opportunity in mobile where you had a lot of performance demands that kept accelerating in the mobile market. And that there was opportunities to sell new course and keep developing. In this internet of things, is there going to be a similar path to more innovation in the terms of the process of core that you put in a chip for an incessive things type of application. Yeah. I mean, there are many applications that need more processing. P and I were in a customer the other day where we were talking about technologies that are required for some of these deeply embedded markets, things like floating point, doing some mathematical functions in a very effective way, a very efficient way, doing in a very algorithms that these deeply embedded devices run are quite complex. And so I can see a roadmap of additional that will develop over the years and deploy. Thanks. It's Vijay Anand from Espirito. A question on the licensing backlog. Tim, as you said, most of the growth has been driven by the subscription and architecture licenses. So given that you expect backlog to be flat over the medium term, does it mean that arm has reached a level of peak penetration with respect to subscription and architecture licensees? Also, would you say, the new type of ARM licensees, the software guys, and the OEMs and operator why wouldn't they go for the subscription or architecture licenses? They might do. But I mean, I think, I think you're going to continue to see probably more subscriptions. And I think what and most of the subscriptions will also renew. And out in time, you're probably going to see more architecture licenses as well. So I don't think it's capped out. I mean, it's a part of the model. It works well for some of our licensees. It is not the most common license model, as Pete showed, most of our semiconductor companies will still continue to take implementation licenses from us. But I think it's going to an integral part of the action. Just that. Hi, it's David Mulholland from UBS. Just one question. You put up the slide showing the different areas of IP you have in different devices. And one of the things that's driven your business has been moving into things like Maui, into graphics and moving into core network processing as well. Over the next 5 to 10 years, should we be thinking of there being further IP blocks coming through from Arm? Obviously, you've got an investment in connectivity, but is that something we should look at as being a driver that maybe isn't so obvious today? Well, yes. I mean, I think I covered, in the application processor space, we are being pushed to add more and more IP just so we can make sure it works together and people can get it out faster. In things like enterprise networking, we have added specific IP that customers have asked for, but as we engage more and more I'm sure there are going to be more demand. And that tends to be where a lot of our product offerings come from. It's working with a partnership, getting their input, and then deciding we're going to build IP for enterprise networking, I would have thought that there'll be more that we deploy in that space. Hi. Janardan Men from Liberum Capital. I'm just going to your slide on potential market shares in 2018 and infrastructure division. And in servers, you're saying it's going to be 10% to 15% market share. And in all the other areas, including mobile infrastructure, 60%, 30%, etcetera. So it's relatively very high market shares, that you expect to get in over the next 5 years in the Infrastructure segment and a little bit more cautious on the service side. I was just trying to understand why that is because, is it that the ecosystem in infrastructure easier to penetrate? Or is it that competition is weaker in those segments that gives you the confidence? And from my understanding, infrastructure is thing where the timing is quite difficult to predict because these guys move, there are 2 or 3 very large animals, which move quite slowly in their own base. And with things like the LTE development for many of the base station manufacturers already completed, So what gives you the confidence that you can achieve the kind of targets that yourself by 2018? So is the your question, sorry, it was an extensive question. Yeah. So one is, I'll divide it into 2 parts. One why is the infrastructure, why do you think infrastructure is going to be so much easier than server market? Terms of getting to very high levels of market share because the starting point is similar. And secondly, could there be the time could be unpredictable. Would you agree that timing could be unpredictable at the rate at which an Alcatel or an Ericsson or a Juniper, whoever it is moves over? Compared to consumer markets or even the server market. So if you look at infrastructure, there are a diverse range of players that were already existing in that market using alternative architectures, and they have made a commitment to move over to the ARM architecture. So they have an established footprint already in the networking space, they were deploying their using alternative architectures, but they've chosen to go with ARM, and so the growth that we see from an arm perspective is kind of a expansion of our footprint in that space, but a lot of the players already had an extensive footprint in that space. So I think that's why we can feel confident that the innovation that they're bringing in other areas like the heterogeneous computing and all the other things that I talked about, it's going to serve them well as they continuing that market. And hence, the confidence that the market shares that we're talking about are going to grow. Now that being said, as you highlighted, the the lead times in terms of people adopting and deploying, on the infrastructure space is a little longer than what you're used to on consumer side, but time in market is longer, you know, 5 to 7 years as an example. And now in the service space, Obviously, there's been one very large incumbent, and so there's, you know, it takes time. I didn't mistake you from Bank of America Merrill Lynch. I had a couple of questions. I'll ask the first one first. Just looking at your slide on servers. I was just you're saying the enterprise server opportunity and the high performance compute opportunity is going to be in 2018. If you take what your customers are saying, AMCC is saying that they're offering that's going to ship in the second half of this year is essentially going to be competitors as E. ON Ross and Averton. And, AMD seems to be planning a similar thing in 2016 by doing their own custom call. So it looks like your targets are a bit conservative, but no, maybe a kid. I'm very happy for our customers to have a bullish targets. And certainly, when we look at the types of chip they're building and they are delivering very, very high performance. Now they've got to get those built. They've got deployed. They've got to get them in boxes. They've got to get them in, in server room. So, yeah, these things do take time. But certainly, there's a lot of they are putting a lot of emphasis behind that. And have very aggressive goals. So, all power to them. Just a quick one on So is there a chance that you can actually end up having more than 10% more than your 10% to 15% share in 2017 rather than 2018 seeing at the moment. Absolutely, there's a chance that that could come through. We think that is a sensible prediction for what might happen, but of course, there is opportunity for more, there's opportunity for less. We are making a forecast out in time and forecasting is Unfortunately, not an exact science. Hi. It's Matt Ramsey from Canaccord Genuity. A couple of things on sort of the enterprise market. So opportunity you spoke a bit about the increase in core counts that's coming over time. And in a heterogeneous design in the mobile space where there's additions of 2 types of cores and and GPU, etcetera. It's pretty clear how the the royalty rate can be additive in that case, and you guys have laid that out for a while. But in in markets where there's big multi core designs that are sort of homogeneous from a corpus active, how does the royalty rate sort of trend in, in that case, as you go from, say, a 16 core to a 48 or 64 core and how do you monetize the IP that you around Coherent interconnect because that that's a big part of the value I would expect in that type of scenario. Yes. I mean, fundamentally, our royalty model is based on a percentage of the selling price of the chip, a chip with 48 57s in it is going to be fairly sizable piece of silicon that's going to sell for quite high rates. So you get that help, in terms of our royalty that chip, plus our royalties are based on how much RMP is in there, whether it's a heterogeneous collection of cores or homogeneous collection, of course, fundamentally, the royalty increases with the number of processes in there. So you get a kind of multiplying factor between those 2. Technology such as CCN is is licensed. It doesn't command a its own royalty, and that's for the technology right now. That may change over time. But kind of how the model for that sort of technology is growing. Did you want to add? Just a quick follow-up to that. And be interested if you've seen anything in in the server end market, and affecting the market with your partners after IBM sourced power 8 and had the, sort of, the open power program and what they're doing there, if that's sort of had any perturbations and and your interactions with with licensees customer? There are a couple of points. They didn't open source power. They announced that they're making it available to other to other partners. They have been licensing power for at least 20 odd years, and still you've seen end user demand for ARM, I mean, IBM themselves licensed their own architecture. In terms of the open power line, the limited number of partners and what they have announced has been companies, that are doing companionships, to the Power 8 SoC. And so I think choice is good. Fundamentally, choice is good. And I think Open Power is bringing another choice to the market. And I think they will address a higher performance point than what the ARM Partnership is targeting. So overall, I it's a good thing for the industry to have more choice. I'm just looking at this slide slide 77 where you gave the ASPs to It's just seeing the math. And it looks like, your royalties could have been about roughly 1,000,000 if you had all core success with reiterating them. And, and that looks like a 200,000,000 difference in the royalties relative to what you had in 2013. Is that the right way to look at it in terms of essentially you're saying if there is no growth, and everything was V Eight and your microcontroller share doubled, you would have had another 200,000,000 in royalties. Is that the right way to look at it? The end of the amount, I'm not sure it's quite 200,000,000,000, but it was $495,000,000 of that royalty for the last year. 6% to $110,000,000. If you 1,000,000. Okay. Okay. Thank you. But 100, not 200,000,000. In your example, the way that a hypothetical case, of course, just to illustrate the average royalty budget issues. Any other questions? You said that you expect, Tim, you said that you expected that the number of architectural licenses are, is going to grow going forward. Can you tell us what do you think? Which end market is more likely to drive that? I'm not sure I said they will grow. I would say that when new architectures are introduced, and ARM introduced new architectures from time to time in quite a long, a long cadence. Then I think it's perfectly of all that there will be new architecture licensees and it's perfectly possible that existing architecture licensees may take a license to new architecture. That's really the point I was making. I mean, I think in version 8 of the architecture, there were more architecture licensees than there have been for previous architectures really because of the timing of the introduction of that architecture and the opportunity that was offering to semiconductor companies to access some of the markets, particularly the last ones we've been talking about today. So I'm not necessarily say there'll be more, but I think there will it will continue to be a feature. I think it's going to be highly linked to our success in some of these new markets. The way we look at developing our own CPU implementations is to create products which have applicability in many different end markets where things that we know we can license to many different customers and good return on the investment that we make on that engineering. So we're covering the majority of applications with our product roadmap. Now the architecture license allows people to go into spaces, which are, economically a good idea if you're a semiconductor company, but as an IP company, not such a good idea. Now as said, there was early adoption of version 8 of the architecture because of its 64 bit capabilities, as the opportunity in servers and networking is becoming a reality. And as that develops, it may well open up opportunities for other people to build chips, which are hitting more specialized, implementations, more specialized applications, which make sense if you're a chip company, but don't make sense if you're an IP company. There's us building, chips that we can know or processes that we only license for one customer, doesn't allow us to get any scaling. So it really is a function of how these mark to develop and how the adoption of ARM technology goes in this market. In the next, say, 3 to 5 do you see potentially the opportunity for more cases like the one you just described? Well, I think we there is quite good coverage right now of the of both these markets in terms of our standard products and customers building chips on the standard products. And customers targeting that with architecture licenses as well. We may see a small number of customers who decide to go that that way as well, but I think it will be relatively small numbers. There's a question behind actually. Previously you've said that you would expect Intel to take about 5% to 10% market share in the smartphone and tablet markets because there's always room for a competitor. Intel and tablets, the CS seems to be likely to be heading above 10% market share, probably somewhere us in the 10% to 15% range and some smartphone vendors like Asus and all have moved all their products across to Intel. I'm just wondering, do you and your partners believe that Intel's market share could be kept at these levels in tablets or what are the strategies to ensure that there isn't any further encroachment into the armed territory? Of our strategy for maintaining high market share, it's about executing on our roadmap. It's about staying very close to our partners and understanding future trends of the market and making sure that the work that we do coupled with the work that our partners do continues to deliver leading edge processors, highest performance, minimum power. And I think the combination of our innovation and the innovation of everybody in our ecosystem, I going to mean that we're going to have a very high market share going forward for the arm architecture. So that involves a lot of hard work, involves a lot of close co with a lot of people in our ecosystem. But when I look at what we're doing, what our partners are doing, Ira confident that we're going to maintain that very high market share. Hi there. Alex Dior from Goldman Sachs. I just wondered if you could talk a bit about how you see pricing dynamics of mobile device chips, a bit more near term in 2014, TSM see, of course, a set of expect smartphone content to increase in 2014, mostly due to high end smartphones. You've obviously given a long term view to on ASPs being stable. But I wonder if you could talk a bit more about 2014. Well, I I I guess so. I mean, we we put up the ASPs on the chart. We we expect that to remain same for 2014. We don't see any major changes, this year. Yeah. I mean, one quarter to the next, you know, ship price is going to move around. Be featured on this slide. New technology comes in at the high end. It trickles down. There's very, is price competition going on because the markets are large. But what we've seen about over the last year or so is actually ASPs staying fairly constant at these levels. Now from 1 quarter to the next, you might get a bit of fluctuation, but long term, we think that is a safe model. Question on the front. It's Andrew Humphrey at Morgan Stanley. I just wanted to ask a bit more about, networking, your play there is to be an increasing share of that market over time in a market that is growing to low single digit percentage wise. Clearly there is a value proposition for your customers there, but how are you working longer term, I guess, to mitigate the risk that you end up importing deflation into that industry. So if you look at that industry, as I talked about, a lot of the that industry is actually used to a very diverse ecosystem in terms of supply base because of the kinds of specialized processing that I talked about. And Semiconductor Companies that are in that market today actually have a lot of value invested in some of the non CPU core pieces, like, you know, packet acceleration and and all of those different, you know, different things, crypto, crypto, whole, host of, of specialized processing applications. And what we see happening is there is tremendous value for that. And, with the addition of the ARM, of enabling them to outsource some of their core IP investments. They're actually able to leverage that into continuing to invest in other areas and innovate in other areas. So actually, I think that I don't see Arm coming to that it is, is, is changing that dynamic only for the better question. Thank you. I'm from Nissan Just a question. We've seen a lot of litigation in the whole tech sector in the last few years, much more so than before, I think. And I'm looking and you had many more architectural licenses, for this time than, historically as we as the industry moves towards 64 bps, what risk do you see the, of your licensees sort of litigating against one another? Or what or do you have provisions on the sort of terms of the license, etcetera, as a any, sort of litigation amongst them? Well, we, we don't force that our customers can't litigate against each other. I think that would be quite a restrictive if if we did. You know, we respect other people's IP as as much as we value our own, and obviously, I think our customers have got a right to go and defend themselves if they feel their IP is being inappropriately used by someone else. I think with the rise of architecture licensing, I don't we expect that's going to have a big change on the amount of litigation that goes on in the industry, amongst semiconductor companies. I mean, the semiconductor space is quite advanced and mature in the way that the cross licensing goes on amongst the big companies on some some of their fundamental IP. And I think really my experience over the last few years is we haven't seen an increase in semiconductor companies, litigating against each other. Patent Trolls has been a bigger growth, but even that seems to be subsiding a little bit at the moment. Well. So I don't think architecture licensing changes that landscape very much. Yes. Phil, you had a question? Just a clarification really, Tim. On the slide on the long term growth opportunity, you described license revenue growth reverting to 10% CAGR over time from a period 14% to 20%. Then you refer to the backlog being guided to be roughly flat over the medium term. Do you need over that 2014 to 2020 period? Is there a point at which you need the backlog to grow again? To start delivering to continue to deliver that roughly 10% CAGR on licensing. And if so, can you give us sort of sense of at what point we would need to see some signs on that. Yes, I think that I think it will go up and down. I think what's going to happen in the next few years is the gap that's been created between the backlog growing that much faster than license revenue. That's going to come into the PM L and drive license revenue. So I think in reality, although we talk about 10% growth out here, there's going to be a period transition from the 30% CAGR we've seen in the last 4 years to that 10%. Part of that is the unwinding of the backlog. I think looking out in a sense to the 2018 to 2020 period, if license revenue is growing at 10 sent, then out in time, once the backlog was normalized, the backlog will also grow at a similar rate to match. It's my Thank you. Just from Bernstein, I'm looking at slide 54, which is a concluding slide of the mobile, Roger opportunity in mobile. And it suggests between 20132018 a royalty growth opportunity between 15% to 25% CAGR. And then in one of the previous slides you suggested 13% CAGR for unit growth of smartphone and tablet. Let's assume the revenue growth opportunity there is about 10%. So it's suggesting between 5% 15% growth coming from royalty rate increases, which can be anything between royalty rate becoming one point three times to two times. So my question is what is the source of this uncertainty? Is that penetration of big little, which is uncertain is that penetration of Mali. You sounded more, comfortable and confident about V Eight. So What's the same? Why the ranges? Yes. As I said, it little while earlier, yes, the exact royalty rate per chip is all about the mix of technologies that are in there. How many cores, whether they're heterogeneous home engineers don't really make any difference on that in a big picture. What the percentage of Mali attaches, how much of our physical IP is used And that's why when we did that 15% to 25% CAGR calculation, it was based on and when we talked through the mathematics of that last year, It was based on growth rates in the different tiers, the kind of ASPs that we expect, how those ASPs might move around over time. And then we modeled scenarios for different amounts of technology adoption across those different tiers, and that's why we ended that range, which may seem quite broad, but as we sit here now looking 5 years out in time, it is a bit hard to call that. There will be different factors affecting it. But again, that to us seems like a fairly sensible range to be looking at for, for the smartphone sector. It's David from UBS. And just a couple of short term questions. Tim, I guess you've not probably seen a fair few of the checks for royalties for Q2. I just wonder if you could give us a comment on your half to get to similar growth rates and royalties that you've seen in recent years as you've guided to before? I guess we couldn't through a whole Analyst Day. Without some questions about the end of next week or the week after. No, I mean, obviously, we, if we had anything material to say about short term trading or indeed full year trading, we'd be saying it. So we remain comfortable with consensus out there. As it happens, we've received a reasonable proportion of the royalties, but the majority. And we're not standing here making any updated current trading. So you can from that that we've got nothing new to say on that. And in terms of the full year, we remain of all with the full year revenue consensus, which is in the sort of 1295, just above range. I'm It's Matt Ramsay from Canaccord again. Tim, in your slides, you you called out what I think is interesting. Another $20,000,000,000 hand market, which is automotive where the share is 7% for arm today. Just to whomever on the panel, I'd just like to hear your thoughts about trends in that market, ASPs, royalty rates, etcetera? Yes, I think Automotive is really interesting as a growth market for adoption of Silicon. We're seeing much more sophisticated entertainment systems into cars. That drives adoption of processes that are like application processes. In driver assist technology. You're going to see cameras in cars all over, trying to keep track of what is going on around you and trying to point out if some other driver is about to, to do something that you don't want. And just generally, there's going to be a lot more intelligence in the car. Trying to keep you safe. So I think that's going to drive adoption of a lot more silicon in there, which is why that market is set to grow. But design in cycles are long. Yeah. Once you design in, you're in forever, but is the market that doesn't move very quickly, and although I can see where more and more technology can be used, it will take frustrating long length of time because all the testing and safety requirements to have to go on in automotive. Hey, Youssef. It's from Marcus again. You've shown us on slide 33 of the achievements. I mean, your roadmap on the hardware side and then 37 on the the software side for servers. So, I was wondering if you look at these two timelines together, what do you think, for in the order that you told us that you want to be able to penetrate the different type of server markets. What do you think is still left to be done? So basically what what comes up at the at the right of the arrow because it starts in 2014. On the on the timeline diagram of that one? Okay. So I talked about the fact that we have a base length platform. You know, we, have Ubuntu that's demonstrated Rev handsets demonstrated, we start to see more and more software partners, but also, starting to see more applications seeing ported over to arms, so that's that's gonna take time. But in terms of, trying to think, you know, middleware pieces coming together, it's it's a pretty the workloads that we're going after that I showed, I think we have a base software platform ready to go to enable that. But as we I think someone asked, Hey, you're saying HPC telco out in time. And as you start to expand the number of workloads that are addressable by the market. More and more of those applications will get ported. So to answer your questions, we have a base software platform ready to go today for the application and workloads that we're targeting today, but as we start to see more and more of the market getting interested in on, those software applications have to get ported. That answer your question? Yes, it does. What I was trying to think is, clearly, there is different type of servers. There's also different type of companies that have tons of different things to runs on these servers. So I was trying to assess is basically, say, for instance, for anything storage, you may have now 100 percent of the top 20 apps that anyone would need. But if you want to move to big data, maybe had to, becomes necessary, you have that as well, but you what what's still left to be brought? So one thing to perhaps make, maybe a little explicit is that there are different abstraction layers underneath, right? So a lot of the applications that are being targeted by arms sit on top of middleware, like languages, like PHP, Python, and all those different kinds of languages. And so those languages day run on arm already. And so some a lot of the applications could run directly on whatever infrastructure there is today. The question of perhaps tuning those a little more and how it rolls out from there. So from a base software platform perspective, we have the OS We have the middleware. We have the boot infrastructure. We have all of the the pieces that you need to make that happen. It's it's just extending that. So I can't say that I in mobile, there's X Mini apps and, you know, in infrastructure, the answer is it depends. I think we really focused on the infrastructure that allows them people to build their applications on top of that. And that's really what we'll see beyond the work that we've done here starting to roll out these servers, build their applications on top. And over time, that will go from being very broad based, which is where we've started to filling in more of the kind of niches, in filling out the entire space. Okay. We're going to make this the last question, and then we'll go to sandwiches next door, we'll I'll chat some more. Thank you. Hopefully it won't be too long then. It's Sandrodon RBC. Just on networking. You've had 5% market share last year, and you're targeting 25% to 35% by 2018, call it 30%. How should we think about trajectory of getting from 5 to 30? And are there any particular catalysts or technological hurdles or whatnot to we should be thinking about for the next few years to get you to that 30%. I think generally when, I'll technology starts being adopted in new markets. It kind of goes quite slowly and then starts to take off. So I think we've got, with all the design wins that we have, we are poised for that to take off. But this is a market that's not driven by consumer trends. Device a new router because it's green. It's on quite a slower cycle compared to a lot of the markets that we're typically in. So So I think probably the uptake towards that 25% to 30% range is more in years 5. And I think you'll see it kind of ramp up at that point. Okay. I mean, you're existing licensees and networking are continuing to develop on mix and power at least in the near is part of your share gain substitution, or is it new markets to them that they're entering? Something is yes, in some cases, what you said. So it's a mixture of things. There's a lot of prototyping and an activity going on right now. It's about equipment upgrades. It's about as network architecture changes, it creates discontinuities where people are looking to service that with the ARM architecture instead of the incumbent architectures just because as we spelled out, that's where the investment's going. So it is a mixture of all. Thanks. Okay. Well, thank you all for coming. Hopefully, we've given you an overview of where we see growth and, there's an opportunity to chat some more as we move next door and, have a sandwich in a cutscene.

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