Arm Holdings plc (ARM)

Analyst & Investor Day 2012

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May 23, 2012

Thank you very much, everybody, for coming to our Analyst Day this year. I'm literally going to stand here for not very long and explain the context of, of the day this morning and what you're going to to hear. You'll normally used to hearing from me and from Tim and Ian. So he's gonna hear less from us this morning and more from, the armed team. We're gonna kick off with Simon, who's, going to be highlighting the importance and key benefits of the ARM business model. Which, you know, our business model is a a key differentiator for us, and that's what enables the armed world to deliver innovation in it. The business model itself also delivers a series of economic benefits to our partners and to their customers. He'll then also look at the next 5 years or so of market evolution and, and some of the opportunities there for Arm and the Partnership and how we're going to bring a real product to market to realize Now the business model is crucial, but also the technology that underpins it is crucial. And Tom is going to talk about how arm is so good at low power, and power efficiency, in particular. By that time, we'll all need a short break. And so after the break, after the break, we're going to look at a couple of areas that are, contributing to growth in over the next several years for Arm, and that are of strategic importance for us. 1 from an Arm product perspective, Peter is going to talk about our graphics offering and how we're developing the potential for leadership in graphics. And then you're going to hear from Ian who will be talking about server design with data centers as an entry point for server design. But the whole significant opportunity that's both presented to and enabled by the, arm architecture being used in servers. And then before we close, we'll have a q and a session. And, well, actually, before we get to the q and a session, Tim's going to Tim, sorry, is going to summarize the growth opportunity and what that means through a financial lens, talking, about opportunities for revenue, margin, and earnings growth over the coming years. So, with that, I will hand over to Simon to kick off. Except the slide isn't advancing sign in there. I'm sorry. Let me help. Here we go. Thanks, Warren. And, good morning, everyone. Hope you're doing well. So as you saw from the agenda, we're going to talk about some of our technology. Tom's going to talk about our CPU roadmap, what we're doing about low power. Pete's going to talk about our our graphics roadmap and what we're doing there, and then Ian's going to talk about how how some of this technology comes together in a product. So before we get into all of that though, what I'm going to do this morning is talk about, Alarm's approach to business, Alarm's approach to working with our customers and how we go about developing some of those products. At the heart of all of that is Partnership. Partnership has been the way that we've grown this company, over the last 21 years, and remains, our view on the right way of doing things going forward. So before we go, look at the future, let's just go back a bit. Army is twenty one years old. I was fortunate enough to join the company just after we got started. And so of, of witnessed firsthand the evolution of the company and the business during those 21 years, And it's been a phenomenal, evolution over those 2 decades. Interestingly, we take mobile phones for grant today, and at arm, we spent a lot of time thinking about mobile phones and where they're going, and you'll see that as a trend this morning. But when I joined the company, actually nobody else in the company had a mobile phone. Apart from our CEO, who had this big twenty year old analogue thing, nobody else had a mobile phone, which is quite strange when you think about day wear, are enough mobile phones in the world for kind of everybody on the planet to have a couple. Now at the time you could buy a mobile phone, the original Motorola phones shown there were about $4000 to buy new at the time, so they were kind of outside the price range of most people. And fortunately, over the last 21 years, These things have evolved enormously, into the devices that we carry around, and take for granted today. Now computers have evolved a lot as well, and these two things have come together into what is now barely recognizable as a mobile phone is really a mobile computer. And today, of course, we have a phenomenal amount of compute power in our pockets, and, as I'm guessing, a huge amount of that in the room right now. So functionality has gone up. And through, economies scale through, the way process technology has evolved, and through the way that arms business model is evolved, we've been able to deliver all of that increased massive increase in functionality, at a much lower cost. And that's been one of the key things that's helped, that the industry as a whole evolvement technology evolve, to what we know today. Now the industry has evolved a lot in in the time frame of ARM. And if we go back to the 70s, before, armors around and, certainly before I was at work. What you saw was fully integrated companies, companies that did absolutely everything themselves. They did design, they did marketing of their products, they sold direct to consumers, and they manufactured everything. They were completely vertically integrated companies. Now the problem with that was if you want to design anything, you had to do everything, and that's a very costly way of approaching the world. So over, over that period since the 70s to today, what we've seen is the industry disaggregate. So first of all, if we look at semi conduct, you had the era of the ASIC model, where there were companies who specialized in getting your chip built in doing the manufacturing, in handing you back a finished working device. That went into, systems, integrating companies I used to work for telecoms company that operated in this way. We did ASICs with LSI. They're getting us chips. We build telephone exchanges. But that model continued to desegregate as well, and what we saw going after that was the advent of EDA. So ASIC companies couldn't afford to do, all of the software developments for, tools design themselves. There just wasn't the economy of scale there. You needed specialized EDA companies who could amortize the costs across the entire industry. So with IP, when Arm came along, if you wanted a microprocessor, you have to build your own. There was no other choice. So it limited the number of people who could build CPU based chips, with the advent of ARM, again, we were able to design, CPUs, design, other IP, and amortize the cost across any entire industry. So it made made it very cost effective, for lots of people to do design. And what that has led to is this industry where companies can specialize, companies can achieve economies of scale and and deliver a much more efficient solution, from an industry cost perspective. Now That has, in turn, enabled very sophisticated designs to be done by lots and lots of different people. We've seen, design costs going up along the way for sure, and I'll come back to that. But we've seen the number of transistors that you can put into a device go up enormously and the sophistication of the device go up enormously because of the way that this specialization has occurred across the industry. Now the downside of this disaggregation is that the potential downside is that if everybody concentrates on what they do alone, then the whole thing becomes actually a bit inefficient. If I only worry about CPU design and I leave you to worry about putting your chip together, then, you know, it may be that I make the wrong decisions based on the next problem that you have to solve. So smart people have recognized this. And personally, I'd like to think of this as not a stack of people, operating a supply chain, but actually more of a kind of circle of companies who where where the smart ones have kind of worked out, but actually communicating a lot with each other, can reduce and remove the potential inefficiencies between these slices of this disaggregated chain. So a couple of good examples. Now as I said, I IP is a has been a, really, an approach to design that that's been really transformational. It's allowed people to take very complex building blocks and build really sophisticated chips without having to do everything themselves. But at the end of the day, you've got to build that. The way you build that is to use EDA tools, and you need a process at the end of it actually go manufacture the transistors. By IP Companies and EDA Companies and foundry's working together, we can look at some of those issues up front. So that a designer can then take all of that knowledge, safe in the knowledge that when he comes to bring it all together, it's actually going to work. So through collaborations like that, we've been able to reduce some of these inefficiencies. But the key to it is an approach to business that is around partnership and openness. And that is what ARM has been doing, and is what we intend to continue to do, as we go forward. So at the heart of our business model, is about helping the efficiency of the industry. What we do is Design IP that we license to people who build chips. Those chips in turn, get sold to, OEM companies who build their own products and every time that, they, they sell one of those, then we, we extract a small royalty from that. Our, our remit is to create those designs to work very closely with our we're very closely across the supply chain, to understand the needs of today, the needs of tomorrow and the needs of, of next week in, to make sure that our technology is going to be well suited for the future needs of those end products. So I said a moment ago, if, in, in 1990, if you wanted to design CPU based chip, your only choice was to do everything yourself. You have to design a processor or the software tools. If you wanted an operating system, you had to write it. And you could only amortize those costs over your end products. Now if you have a lot of them, that's great. You can afford to do that, but very few people can And so, the the IT model of providing processes and, obviously, been enormously successful in that, has proven to be a very successful way of enabling lots of people to do ship designs without having to reinvent the wheel every time. Now we are not alone in that. We have a very active partnership of over 900 companies, we call this the connected community. And part of what we do is, is taking the profit business generates and obviously investing it back into our R and D roadmap, and you'll see some of that this morning. But we also invest that in, developing this community of companies who are gonna help with the usage, of ARM Technology by anybody who wants to use it. Whether you're writing code for an ARM processor, trying to get your chip tape out or tested or packaged, trying to run an operating system or applications on top. Through this network of companies that we actively developed, and engage with, there is somebody who can help you. And that's a really, really important thing. You know, we we work hard to ensure that no matter what you're doing around arm, There is someone where you've got a problem who can help, help you solve that problem and do it in a way that is economically viable for them as well as for you as well as for Arm. That community is a great thing. The partnership is a great thing, but it does only work if everybody can make a profit from that. We recognize that, and work hard to ensure that the that the community around arm is as vibrant, as possible. So, this model, the way the industry is evolved, the way ARM has evolved, has helped, create lots and lots of different products. If we look at how some of these have evolved over the years, going back to 1990, as I said, there was, you know, big old analogue, phones, which didn't have a an apps processor inside, and that'd be really full of apps. You know, the internet didn't really exist back then, or the web didn't, certainly. And so making phone calls was, you know, just about all you could do with it. I actually have one of those phones in my office, and it is so big. The instruction manual is actually printed on the inside of the battery. If you're wondering what to do, you can take it off, remind yourself to get back together or off you go. Now in the 1st decade of armed existence, what we saw was phones get a lot smarter. Arm protesters came into these devices, and they moved from being machines that you could make a phone call on to machines you could start to organize your life. And we saw, you know, the the first smartphones, really feature phones, with armed processes in them, with enough processing power to run other applications to help you with your calendar and your contacts, etcetera. In the same time period, what we saw with desktop PCs was then go from being big gray and ugly to be big gray and ugly. Pretty much doing the same thing they ever did, running the same software that they ever did, enabling you to do what you did before. Without really any significant reduction in the cost, of the raw materials. The CPU still cost you a couple of $100. Now in the last 10 years, we've seen smartphones get even smarter. The number of processors integrated into those smartphones go up. The amount of technology integrated into one single chip go up and up with more connectivity, more functionality, such as graphics, as you'll hear about later on. All integrated into one chip, where through economies of scale, through the manufacturing, in the that exists around, around the fabulous community, you can get that chip for as low as $15. And it's not a lot of money to spend for a hell of a lot of transistors. On the CPU side, I'm sorry, on the on the desktop PC, on the PC side, things have changed a bit. You know, laptops are much more common now than they were 10 years ago. Still, though, you do pretty much the same things with pretty much the same old software. And while some arm technology's got in there, in this drive and in some of the connectivity, the main CPU, it's still gonna cost you a $100. It's still very expensive compared to all the functionality you can get on the left hand side of this slide, for 15. So that doesn't look particularly satisfying. Going forward, though, you know, I think the next 5 years or so, it's gonna be where it gets really, really interesting. We're going to see, on the left hand side, there, more and more functionality, higher levels of data connectivity, higher levels of a graphical and and video interface, and where where we have a a new opportunity is on the right hand side. Where the ARM technology now is sufficiently powerful, in terms of delivered performance, that we can start seeing it in more conventional clamshell form factor and other form factor devices. With the very low power consumption, the high integration of the, of the, functionality into these chips, that can sell for $20. This opens up, I think a a new new realm of devices, new opportunities for new form factors, very low cost, no fan, very thin, very lightweight. And I think we're going to see, broadening, you know, evolution of the type of devices available, all based on ARM Technology. So I think that the next 5 years is going to be really interesting as we see these revolvers. As what you do with the device that you see on the left, on the right hand side there can suddenly change in how you, how you interact with the the web and, and data services at large can change. So it's gonna be, really interesting. As we look at kind of how we've got ourselves to here, question then we need to ask ourselves is, are we organized the right way for success going forward? Before I go into that, I'm going to look at, though, is some of the technologies that that we look at within arm as key drivers, of the next 5 years or so. So the key technology areas that we look at are, obviously, mobile computing. As I said, we spent a lot of time in arm thinking about phones and tablets and thin form factor devices, but also servers. If you had a chance, outside before this event started, we have a Calzada box set, which is really interesting. Connectivity, how all these devices are gonna talk to each other, and the internet of things, which may seem a bit less glamorous, but I think, is a really exciting technology area. So let's look at, some of these, in a bit more detail. Now mobile computing, you may think it's just more of the same, but I actually think that the way in which, mobile computing is being driven has changed. It's gone from what technology can I put in this device to, what the users actually do with these devices? And so the usage model is much more driving the specification and the requirements, of mobile computers now than they ever were. Devices have changed, as I've been saying, enormously, from machines you make a phone call on to machines that you operate your life with, that you interact with, interact with data services. Some of those some of us were talking about that just now just before the event started, and and how you organize around your, your work life and also, you know, your, your social life, your home life, Increasingly, a lot of, a lot of the way you're using this device is about how you interact with others, how you interact in a in a social way, which doesn't necessarily mean goofing off at work searching Facebook, it means having the right data and right interactions with the right group of people based on the context that you're currently in. So it may be an event like today, you know, blogging about what's going on at this event or at a conference. It may be sharing photos of your son's broken arm, which happened to me last night, with the rest of your family, whilst you're on the road. So using the device to interact with both work, with your, your personal life in a more connected social way, is really driving the evolution of these devices. The technology, though, is still, you know, provides some some underlying limiting factors, but that usage model is driving some of the key things about data connectivity rates, about screen sizes, about security, which is another really important area that we see, because there's more and more of your personal data goes on to this machine, then you're going to really, really care about how secure it is. So there's a lot of things that get in the way, but what's clear is that we're gonna need a range of different solutions, to, to a rest future needs. Now I'm sure all of you in this room, given what you do for a living, are pretty well aware of how mobile phone, volumes have grown over time, and the forecast out for what they're likely to do going forward. Here we have some data from Gartner, showing over 1,200,000,000 devices, mobile devices down in 2014. And this is, smartphones in all levels of smartness. We are seeing a kind of, tiering of levels of smartness. In the west, it's very easy to think about the very high end phones, the the so called super phones with big screens and wizzy graphics and all the rest of it. But there is a huge growing market for low cost devices, in emerging economies. And a big business opportunity, around that. Kind of 2009 was kind of interesting take off point for smartphones. I think a couple of things kind of came along at the same time. We were able to deliver a processor that was powerful enough to enable different applications to be downloaded onto a phone. And what really changed at that point was all the software that the machine ran was not on it when it left the factory. And if that's the case of a of a feature phone or a basic phone, but with a smartphone, you can download applications, and with a combination of of a high performance processor, of a touch screen of an open operating system. We've been able to put a platform in the hands of thousands of developers who can then then take all that underlying hardware and innovate around it. You know, we aren't constrained by the person that designed it in the first place and the the narrowness or restrictedness of his imagination. We've been able to give this to thousands of people who can now think about it in different ways, and people regularly find ways of using the underlying hardware that none of us ever thought of when we were thinking about the ARM processor, you know, that's going to go out in the future, and nobody in the device manufacturer thought about either. And that's what makes it really interesting. And means that there is an insatiable need right now for more and more compute performance, in these devices. More CPU performance GPU performance and using these in very, very creative ways. So we see needs for more and more compute power going forwards, and you'll hear about some of our road map activities later on this morning, and we're going to continue driving that, that forwards for for many years to come. What's key though is, is that with all of these different devices, you need a different range of solutions. You're going to see single core phones in low cost markets, going to see quad core phones in high performance market. And whilst it's easiest to think about just the top end and just the apps processor, there's actually a lot of other technologies within your phone. Now I don't recommend you do this, but if you took your phone apart, what you would see is many different, silicon devices in there. You'll see the big apps processor, and that's the kind of the sexy thing that gets a lot of airtime is manufactured on the latest, greatest, process technology, but you'll see a lot of other devices in there as well, interfacing with the outside world. Whilst we like to think about all things digital, the outside world is annoyingly analog, and interfacing with it is actually quite difficult. So what that requires is, is a range of different, technologies, different process technologies, and it isn't all about 22 nanometers and funky transistors, you know, some of those older technologies are going to stick around for a long time, 0.18, 0.13 micron, higher voltage, domains, analog devices to lay the interface of the outside world, you know, the power management, the touch screen, require analogue interfaces. So those technologies are very important. We have to keep driving the cost out of them but you'll see them around in this device for a long time to come. And as we try and continually shrink the form factor, what's going to be required is to put all of these technologies together is more creative ways of packaging devices, of stacking dye together into what's called a 3 d IC where the connectivity between the different dye is straight through the silicon. Lots of, technical horror associated with that that we have to solve over time. But different technical challenges that aren't just about making a CPU plot faster. So lots of different dimensions on which we are, evolving the technology for mobile devices. I've got this slide going in there, I see. And so on top of all of those devices is the software that runs on it. And, obviously, We have been, working with Microsoft on their Windows Onarm Initiative. This is, a carrying on from a a long, engagement that ARM and Microsoft has had, ARM has had people up in Redmond working on, Windows devices for, for a long time. Windows mobile has been running on ARM for many, many years now. And we're expecting to see that deployed into, you know, these very high end mobile devices again, in a different range of form factors. Now we think that that's going to deliver some really interesting technologies. Those clamshells are I was showing on one of the earlier slides, different tablets, different form factors running windows is going to offer some new opportunities for people making ARM based devices, and we think this is a really, interesting time. Now that's going to roll out obviously over the next next little while, we're working to get ready for that. We're working with our partners to get ready for that, and we're very excited about the prospects of the kind of device, that we're going to see. Now you don't need to sell many of those devices before somewhere in the world. Somebody needs a new server. And later on Ian's going to be talking about the work we're doing around servers. Now all of these new devices, as they grow, as they consume vast amounts of data, is going to lead to an order of magnitude increase in the amount of data flowing around the Internet. And that just does require lots of service. That's a great business opportunity in its own right, but servers are annoyingly power hungry. And unless you want something the size of the 3 gorgeous and power station in your back garden, then we need to do something about that, and we are doing something about that, both in arm and with the arm partner ship and with the armed community, around all of that. Servers are a big drain on the world's power consumption. And so there is an opportunity to take all of the goodness around the R model, very low power processes, very efficient manufacturing and design. To build it SoCs for servers. Instead of conventional multipurpose chips, the fuel servers, What you find is if you know what you're doing, then it's always most power efficient to build some dedicated hardware to solve the problem. Servers have themselves evolved from being general purpose things that calculate the weather in Tokyo next week, too, farms of machines, which are all running the same application over and over and over again. And when you've got a context like that, an SOC may well be the best approach, for achieving very low power. So that is something that's very interesting to us. It's interesting to our partners. And I think over the next few years, you're going to see different approaches to building servers. Which are going to fundamentally deliver more performance in a very, very power efficient way. Now that means that an ecosystem around that again, I don't want to steal Ian's thunder, and I'll let him talk about that. At the other end of the computing spectrum is the internet of things. Now what the internet of things has in common with servers and cell phones and everything else is it's about getting the right amount of compute power in a very low power implementation and then deployed in massive quantities. The internet of things is about combining sensors with processes in very power efficient networks to gather data from, you know, everywhere in the environment, from machines, talking to each other, embedded in buildings so that you can control the lighting and the heating, embedded in the road so you can work out whether it's a traffic accident and generating vast amounts of data. Now data in itself is not particularly interesting, What is interesting is the information that you can glean from that data. So the data needs passing to a server so that we, as humans, can take action based on it. And there's some good examples about how this may, may help us all in our day to day lives. Yesterday, driving around London turns out that the Garden party at Buckingham Palace, our cab driver knew that, so he took some different route if I'd been driving around London and I didn't know that, I'd have got stuck in a traffic jam. Now, you know, where the Internet seems deployed and traffic information was being recorded live. Maybe the satellite navigation in my car could get reprogrammed on the fly to divert me around it. And I can tell you, a lot of people did not know that was going on yesterday, and there was a lot of traffic congestion that this could have helped with. Other things, and there's kind of an example out there we do with the lighting app patient. You know, if your dishwasher tells your washing machine not to run the spin cycle right now because I'm about to, then you'll get a smaller power spike into your house. That helps with energy deployment, helps you with your electricity bill. So lots and lots of ways in which intelligence embedded into everything around the plan can help make, the world a more efficient place. And we think there's a big opportunity for, for Arm Technology in there. Connecting all of that together is mobile infrastructure. We're seeing the amount of data flowing around, going up enormously. And as a result of that, the architecture of mobile infrastructure is changing from being very centralized, to being more decentralized, We're seeing the growth of micro servers of, sorry, micro cells, FEMTO cells deployed, you know, closer to the edge to gather these, to get it into the internet. Give the answer back to whatever mobile device you happen to be carrying around with you. So, change in architecture here, again, big opportunity for more machines and more deployment of ARM Technology. So as technologists, we look at this and go fantastic. Big, hairy problems here, intellectually interesting problems to go and solve, from a technology point of view. From the business point of view, what's what's clear is the demand for semiconductors is not going down any time soon, and all of those devices have in common that they need high performance, low power, low cost, and that is what the ARM ecosystem is really good, at delivering. Now we've used this partnership model to get from where we started to hear And we strongly believe I firmly believe that the partnership model is the way that we're going to address some of these key technology and business challenges, going forward. It's all about collaborating, collaborating in an open way. At the heart, what we do is design technology and deliver it to our customers who build chips. The cost of building a chip is pretty scary these days. If you wanted to build yourself an advanced fab on 2022 nanometer or something like that, the bill for the equipment alone is going to cost you about $6,000,000,000. That's on top of the 1,000,000,000 or so. You will have spent maybe 1,000,000,000 on the process R and D. So very expensive proposition. The cost of all of that has to get amortized across the chips that are built on it. And that means that the cost of the silicon you know, unless you get the scaling out of it goes up, and that's not something, fortunately, that's happened so far, and we're gonna have to keep working away, to make sure it doesn't happen in future. Utilizing all the transistors that you put down, leads to increased design costs, verifying that when you put 1,000,000,000 transistors down on a chip, they're all connected up in the right way is a nontrivial problem. So the cost of design, the cost of verification goes up. The cost of manufacturing has gone up. So the masks that you need to run through the fab, very expensive, maybe a couple of $1,000,000 for each design. So you then don't get that wrong. So people spend a long time, on verification. So the cost of design going up. And then when you look at the software that's going to run, that is also getting very, very complex and, hence, very expensive to develop. So all of these costs are pretty scary when you look at it. And again, it comes back to the only way to approach this is to take a modular approach. To integrate highly, optimized and verified building blocks that you can put together to leave yourself with a tractable problem. You just cannot afford to do everything from scratch yourself. You have to leverage work that is done around the industry to have any hope of building a device of the kind of complexity that we and our partners do actually put together. So to do that requires collaboration between the key partners in the ecosystem between designers, actually building chips between people manufacturing them and everything in between between the IP companies, the EDA companies, the software designers. It's really important that we work together around open standards, around APIs that everybody can get access to to ensure there's a high degree of reuse from one design to the other and a high degree of knowledge sharing to make this a problem that is actually you've got time to solve. So I think that the industry is only going to survive against this increased complexity, increased cost if we operate in that way. So open this collaboration absolutely the key, to our success and to this industry's success going forward. When we look at the kind of chips that, that we anticipate our customers to build, to solve a lot of these, problems going forward, we're seeing an increased number of multicore designs, gigahertz microprocessors, integrated into a chip with maybe 1 or 2 specialized presses, things like graphics and video running very low power, at very low cost. That $10 to $20 price range really important to enable the wide range of end device that we're getting used to, used to dealing with every day. So for our part, it's important that we build those building blocks to prevent a wheel reinvention every time in our customer base that those building blocks work really efficiently together so that jointly we can unleash the creativity of thousands of designers around the world. If we go back to the integrated model where only a few people do each step, that is not going to lead to, of proliferation in the type of devices that we use is not going to lead to an awful lot of choice for consumers at the end of the day. And we think that is a bad thing. So which is what we're trying to prevent. When we look at advanced process, again, there are some pretty, pretty hairy issues that you have to deal with. Annoyingly, physics does get in the way. And as you're trying to build transistors as small as 20 or 14 nanometers, You've only got a few atoms of silicon to play with, and they tend to behave a bit erratically, and so you have to work out how to deal with them. Manufacturing is very hard. It is there's lots written about everybody having issues with the manufacturing right now. That is not surprising. It is very difficult. It always has been hard, but it's really hard right now. Unfortunately, the industry's got fantastic track record of solving these problems. And whatever issues exist today will get solved, over time of that, I am pretty sure. So as we look at how arm designs get deployed on these advanced processes, in as I was saying earlier, it's no good if we just say, well, I've designed my CPU, you know, implementing it is your problem, you know, off you go, have a nice day. We long recognize that we have to worry a lot about that. We have to worry about how the CPU and the GPU connect together. Through our system components and ensure that we can deliver that in a way that can get implemented on these advanced processes. When we look at the 2014 nanometer space and we look at all of that technology that people want to put on chip, one of the other challenges that we have is the power scaling, that we've enjoyed for the last 30 odd years. It's kind of run out of steam. So we have to spend more time on design to really get the power out of these very, very complicated SOC. So we work in anticipation of these problems. We've engaged very early with the foundries on advanced process node, 20 nanometer, we've been running silicon for a number of years now, to look at the challenges that come from, advanced structures and to preempt the challenges that our customers are going to face when they come to do it in a real product. In this way, we can solve a lot of those problems upfront and derisk and increase the time to market for our customers when they come to take cortex A15 or our future 64 bit cores and put them on one of these advanced processes. We've been doing that with 20 nanometer for a number of years, work on 14 nanometers is underway, and we believe we're in a strong position to provide that complete solution to the problem that we are solving. We aren't trying to solve every problem on planet, you know, that's what our customers do. They're going to take out our building blocks, integrate them, implement them in a very power efficient, cost effective way and put their own creativity around the outside of that. So we are gearing ourselves up to continue to be ready for when our customers move to these advanced process notes. So around all of this, as I said earlier, is the ecosystem. What Arm is doing is, it's very interesting to us. It is nothing without the work that we engage with across the entire industry. Our connected community for the membership of over 9 hundred companies is there to make sure that no matter what you're doing, health is on hand. Whether you are building a chip, you know, working with a foundry getting taped out, whether you're, designing software tools, you don't need software that's going to run on the, on the chip, whether you're utilizing the operating system or running applications, that connected community is, is helping you solve that problem. Now, you know, we we view that as a, as a really important thing. You know, nobody can do everything. You know, we've never thought do everything, and that's certainly not going to change over time. Partnership is the Z way in which we're going to address the next round of technology challenges and do it in a in a business efficient way so that everybody here can make money along the way. So In summary, this aggregated model, we believe it is the way forward. Re aggregation, I don't think, is going to help solve problems going forward. I don't think it's going to help lead to a high degree of diversity in the end products that, that consumers get access to as they walk down the high street. The way we've been working thus far has been a very successful way of structurally lowering the cost of doing design. And when you can lower the cost, The volumes go up. More and more people can do it and better designs are delivered, at the end of the day. We think that's been an important thing for the last 21 years, and I think it's going to be an important thing for the next 21 years as well. And we've seen a vast array of products build around arm, all of which have this this key or leverage is key, attributes of our products of low power, low cost, and utilizing the ecosystem. Whether you're building a a chip for a dishwasher or a smartphone or DVD play anti lock brake systems and cars. All of that is is helping you do that in a very cost effective way. And we believe that this is the way that we're going to, address the next round of challenges. So with that, I want to thank you. Thank you for coming today. Thank you for your attention. And I'm going to hand over Tom, he's going to talk about some of our roadmap, for how we're delivering the technology into this next generation of devices. Thank you. Thank you, Simon, and good morning, everyone. So as Simon said, my name is Tom Cronck. I'm the deputy general manager of the process of the vision. As such, I'm responsible for the development of our process of technology and, you know, the development of that business in general. Not surprisingly, I'm gonna talk about, processes. So Simon has talked about how we develop processes in a in a very symbiotic ecosystem, how we work together closely with people, and how effective that ecosystem is at both rapidly developing and perhaps more importantly, even rapidly deploying, great technology. He also showed very, at a very high level, how processes sit in modern day, system on chips, more of more and more of them, embodying more and more of the functionality device, comes from the processes. I'm actually gonna speak, as he said, about, another attribute of our of ARM and of our processes, which is energy efficient design. And ecosystems aside, low power pressure to design and energy efficiency design has always been and will remain a prerequisite for the success of these systems. If you can't do that, you can't build, successful systems. I'm gonna use an analogy of DNA So we all know that DNA contains our genes. Our genes are are contained in every single cell that we have. And our genes completely define the way we grow and the way we function. And in that sense, it really is a good analogy, because I'm gonna put forward, a proposition that Arm has a low power gene, an energy efficient gene. And I'm hopefully gonna show you how, that manifests itself in the products that we build day to day and the difference that that makes to the partnership and to the end products that are produced. So Why do I say we have a a a a low power energy efficient gene? So we go back to the beginning. So as Simon said, the the company was formed 21 years ago, We had 12 engineers, in a barn. And this is a twofold effect here. First of all, The end market that the the guys were designing the first processor co cause for was PDAs. Which was a new concept in those days, personal digital assistance. Those were battery powered, and therefore, by definition, the processor had to be designed to work in an energy constrained environment. But the second effect was quite significant as well. It's more of an evolutionary effect or a pragmatic effect, you know, 12 guys operating in a in a world, which even then was, you know, a field a field full of giants. They basically had to produce a core, that was small just to be able to do it. And they were also constrained as a startup with budgets and things like that, so they had to find a way of doing it a different way have to find a different way of doing it. And that led them to risk. And really those 2 effects, part by design, and part by necessity really sort of gave birth the low power gene. Now if I went on, as Simon said, you know, phones became, feature phones, became smartphones, became back to PDAs, and functionality got richer and richer. But the low power, gene still prevails, and I'll explain how. So the the List at the bottom really is a hierarchical step to to producing an end product from the arm architecture. It starts at the top with a specification. Last year, we'll talk a bit more about this later. We defined the next generation of the ARM architecture, a we call the version 8 specification of the architecture, which happens to be a 64 bit implementation. That is quite literally at the top level of paper specification. It describes the instructions that are included in the architecture. So this is the instructions that the machines execute it describes the way they interact, the way they interact with software and the way you program the machine. And every single instruction that gets put into this architecture goes in with the conscious and subconscious Thought, what's the impact of power? Does this save power? Will this make a will will this make efficient systems? Will it make it easy to build efficient systems? So that goes in right at the beginning, at the top level. Beyond that, we then get to what we call the microarchitecture. There's so these are the products that you know, the Cortex AA 8, the cortex a 9. That's a representation, a design based on the architecture. And, again, you know, at that level, the gene prevails, you know, what what's what's the impact of putting a register there? What's the impact of putting a register here? Is this driving, to an end low power system and on and on. So the next part is worrying about integrating that design in a system. How's the process of talking to memory? Did it really need to move that piece of memory? Cause if it did, that's gonna cost power. You know, these kind of trade offs all the way through low power, low power, low power, Implementation is how you actually take that design and then produce it in silicon, trans transistor structures, libraries, memory structures, all of these things again. The low power gene, prevails. And then we go full circle. If you've done all the the way through, then, the guys that really bring these systems to life, the software developers has the absolute best best possible chance of producing, low power and energy efficient systems. So what why why does it matter? Why does this energy efficiency gene really matter. So of course, in the early days, with the phones, as Simon said, it was simply about talk time or on time in the case of the PDA. But as time has moved on, it's been about increasing higher levels of functionality. Doing more for less because battery technology is not really evolved at the same rate as, and in fact, it it hasn't evolved at same rate as, you know, semiconductor technology. So, all designs are still very energy constrained. Even designs that are plugged into the mains are energy constrained because when you're when you design a low power system, it means it's about not having to put vents in the system, not having to put fans in the system, reducing the carbon footprint, or just basically it's simply a simpler more simply about building cool products. The TV outside is a fantastic example. The Samsung TV, if you get a chance to see it later, you know, it it It's a beautiful thing. It's a 46 inch plasma TV. Sorry, plasma. It's an l e LED TV. No frame. It it just looks great, but it's better than that. It has, textual controls so you can move your hand around and navigate through the menus. You can even talk to it. And all of that is really only possible, because it's a very low because of the very low power design in the system. You'll see the thing is only an inch a half thick. You you know, where are the electronics? They're hidden. They don't have to be cooled. It's all made possible because of low power design. Another example on the internet of things, and and and one I I find quite amusing is a as an engineer, is an example of one of our our our microcontrollers being used in construction So you take a microcontroller, you take, a little battery, you take an RF transmitter, and you package it into a little package besides the p, You then take a shovel and you throw these into, cement when it's being mixed. You will not find out. Thank you. 2 minutes? Okay. So back to these You flow them into Cement, and then, they basically detect the temperature of where they are, and they form a mesh network when you're building big structures like dams, apparently, it's super critical to the strength of these things that the layers of cement, subsequent layers of cement all get added at the right point. And through this mesh network of temperature sensors, you know exactly when the right point to add the next layer is. So all of these amazing, ideas that are that are that are spawning out of the internet of things. So let's look quickly at a couple of the products. At the high end today, and these products, the a we have the CORTEX a 15, which really, defines what we call low power computing, The a 15 was publicly announced by us back in, 2011, September time frame. And it delivers a really significant uplift in peak performance So if I if I use the a 9, as an the arm 9, processor cortex arm 9, as a reference, point. The R9 actually, there's 2 cortex R9s in the plasma TV I mentioned, just before, sorry, not plasma LED TV. I mentioned just before, and our 9 systems really define the best user experience today on tablets. Yeah. The best tablets out there today are our 9 is a superb web browsing experience. A 15 will give a significant uplift again on that performance point with tablet. And in fact, a 15 will deliver a surplus of computing relative to the bandwidth that you can actually get through connecting the device today. So you'll see new experiences and new apps and things coming on the back of that one. At the other end, the o the always on ultralowpowermobile category, we also recently announced the core text a 7. The all the core X A 7, is 1 5th of the size and delivers 5 times the energy efficiency of processes that are in most of the zones today. So a massive, massive, step forward. Now you can either use that to maintain the performance point and realize a cost saving so you can imagine entry level phones tomorrow based on this process delivering high end phone performance from the high end, you know, the high end phones today, but at entry level price points, Or or you can use it in another combination, which I'll show you in a more in a moment where you can get the best of massive massive battery life and peak performance. The other story that this slide this slide shows, is in the pictures on the right. So the pictures on the right show, 2 generations of process technology, over 3 3 to 4 years. And if you were just to rely on Moore's Law, you would expect the area of the device to shrink to 25%. So, you know, halving every 18 months, 25%. Actually, through smart line, in the process of course, we're actually achieving better than that with A7. So with A7, we're down to 1 10ths of the size that you were 2 generations ago, in process technology. So another good example of the low power gene, the energy efficiency gene coming to the fore, was another announcement we made last year which is this concept which we call big little. Big little allows you to Mix, different sizes of processor. So the Cortex A15 and the Cortex A7 both deliver fundamental different performance points and operate at different efficiency levels. From an architectural perspective, they are identical typically they're quite different, but architecturally they're identical. This means that software can run on either of these cores without having to be aware of the difference in the cause. So you're also probably familiar, lots of end equipment manufacturers are today selling products on. It's got 2 cores or got 4 cores with concept of MP. Today, those cores are the same. So you'll have 22 core text a nines, or you might have 2 cortex a 8 or 4 cortex a 8, whatever. This concept of big little allows you to mix. So I can have 2 a cortex a sevens, and I can have 2 contexts a, not a a 9 sorry, a 15s, for example. And you you might wonder why And the reason is it allows you to really stretch the performance envelope. I can have a very high peak performance delivered by the A-fifteen, and yet I can have a very, very long battery life sustained on, you know, like background tasks by having the software run on the a 7. And the software will migrate completely transparently between the two calls depending on the need of that particular task. So clearly, if if the if the CORTEX A 7 has enough performance, it makes sense for the software to sit there. Because you get this energy efficiency benefit. And the chart shows how Each of these cores save, save energy relative to, a dual core A9 implementation. The blue shows you a 16 with some very high performance dependent tasks, and the green shows you a 7, with some lower performance dependent tasks. But it's interesting. You can see, I think this is an example. Actually, that low performance point isn't actually that low. The the A7 is more than capable of running the form OS and a game like Andrew Bird, for example, without you even needing to to, to bring in an 8 15. So another great, illustration of smart energy efficient design. Next two slides I'll just touch on briefly. The process has part of the problem. It's a big part of the problem or But we we we you mustn't forget the the rest of the system. So as I mentioned at the beginning, we think about the way the process is in the system, how it physically connects to the system, how it talks to other processes. I gave you an illustration of that just now with big little. And we think about energy efficiency on all these things. Consequently, we also, within the process of division, produce, system. We call it system IP products. So memory controllers interconnect technology. We actually produce and sell alongside the processes because we need to develop it to to keep evolving the processes in the in the right direction. We also produce graphics processes the same ethos, prevails and people talk about those in a moment. Back to the ecosystem message. Of course, it isn't just about arm in this context. And actually going back to the DNA LNG, the best of read in the end comes from, you know, mixing, DNA and mixing the best DNA. And that's the feature of this symbiotic ecosystem. So the processes are important. But in the end, everything matters. The implementation, the EDA, the operating systems, the software, it all it all needs to work together, in a symbiotic way. One slide to the future. So in March this year, we, launched a product which we call the, CORTEX M 0 plus, This is the latest of our microcontroller offerings. This is the type of process that you would find in the in the cement example I used. This processor delivers 40% more energy than its predecessor. So that's arm to arm comparison. And it delivers greater than 2. In fact, it's probably it's 2 to 6 across the spectrum. So a greater than 2 to 6 greater than 2% sorry, two times energy efficiency gain, over any of the competitors, in the field. And as I said before, it's it's really it's really few it's really fueling people's imagination in terms of applications. Another great example, I mean, you can just let let your imagination go with Another great example I like is, the umbrella, which I call the Take Me umbrella. So you leave this umbrella by your door. The umbrella is connected to the internet and it has a proximity sensor. You go out the door. It knows it's gonna rain. So it calls to you. Take me. Take me as you go out, you know, and you you can just go on and on and on with the the things that, you might want to invent. Moving on. Less of that. So, the RB8, I mentioned that we, released this architecture publicly last year. And Ian is, I think you're gonna talk, in more detail about it, aren't you, in the in the high end context. This will drive us at a rapid pace, into new new market segments. So we are not we allowed to spec last year. To date, we have 4 architectural life So that's spec level licensees and 4 of our processor implementation licensees. So for architecture, for implementation licensees, already on this. And we'll talk more about our products cortex a, whatever we end up calling it, later this year. So a quick recap, Arm was formed 21 years ago, with the ethos of energy efficient design, low power design processes, that was part by design, I. E. The market, and part through necessity, small team, limited resource, had to think small, had to design efficient processes. That was then the need in the market for low power and efficient designs still prevailed. It's in fact, it's an absolute necessity if you want to make successful end products. I really liked the DNA of energy as you probably picked up. And I think big lit big little is just another fantastic example of how, that low power gene permeates permeates through everything we do. And, yeah, another important aspect attribute is once you have that basic capability, you can you can achieve massive scaling. And I think we're in a new unique position with the Arm architecture in being able to deliver these tiny microcontrollers right the way through to server type, machines all based off fundamentally the same, instruction set, same architecture. And that, right on time, concludes the talk. So logistics, I think we now have a break, it's a 20 minutes. So if you if you've come back at 20 past, we'd much appreciate it. Thank you. So welcome back. So my name is Pete Hutton. I'm the general manager of our media processing division. And what I'm going to do in the next 20 minutes is take you through how we've laid the foundations for graphics leadership over the last 6 years. So 6 years ago, we acquired a small company in Norway. Since then, we have built on that. I'm gonna take you through what we've done. Yeah, there we go. So firstly, why is Grafic's important? So it's very important to consumers in terms of interactions with devices. You've seen some of the devices outside. Clearly, you have your tablets and your smartphones. Graphics is increasingly one of the things that drives consumer purchase of those devices. So it's very important to our end customers. Graphics is a priority for anything with screen. So smartphones, tablets, digital television, set top box, personal navigation devices, in the future washing machines, printers, anything with the screen is a target for us. And by 2016, there'll be 4,000,000,000 Internet. Connected screens, all of which are a potential target for our graphics. So it's a very compelling market for consumers. It's a very compelling market for customers. And clearly, it's a very compelling market for ARM. 4,000,000,000 devices, is a fairly attractive market to go after. So this slide is probably the most important in the entire deck. I think my part of the day, guys. Okay? Sorry. Sorry. No. It's actually the most important, not, anyway. Anyway, So I think we've been a bit reticent about saying where we are in terms of graphics. So this slide does it. It's fairly busy, but let me walk you through it. So we are the most widely licensed graphics processor, available. So we have 60 active licenses. Now what I mean by an active license is a license that we think will generate units and will generate royalties. We have more licenses than this, but my IR colleagues regularly pruned them at think they're dead. So we have 60 active licenses. And you can tell that 46 of the things that drive consumer purchase of those devices So it's very important to our end customers. Graphics is a priority for anything with a screen. So smartphones, tablets, digital televisions, set top box, personal navigation devices, in the future washing machines, printers, anything where the screen is a target for us. And by 2016, there'll be 4,000,000,000 Internet connected screens, all of which are a potential target for our graphic So it's a very compelling market for consumers. It's a very compelling market for customers. And clearly, it's a very compelling market for Arm. 4000000000 devices, is a fairly attractive market to go after. So this slide is probably the most important things that drive consumer purchase of those devices. So it's very important to our end customers. Graphics is a priority for anything with a screen. So smartphones, tablets, digital televisions, set top box, personal navigation devices, the future washing machines, printers, anything with the screen is a target for us. And by 2016, there'll be 4,000,000,000 internet. Connected screens, all of which are a potential target for our graphics. So it's a very compelling market for consumers. It's a very compelling market for customers. And clearly, it's a very compelling market for ARM. 4,000,000,000 devices, is a fairly attractive market to go after. So this slide is probably the most important in the entire deck. I think we've been My part of the day, guys. Okay. Sorry. Sorry. No. It's actually the most not anyway. Anyway, So I think we've been a bit reticent about, saying where we are in terms of graphics. So this slide does it. It's fairly busy, but let me walk you through So we are the most widely licensed graphics processor available. So we have 60 active licenses. Now what I mean by an active license is a license that we think will generate units and will generate royalties. We have more licenses than this, but my IR colleagues regularly prune them if they think they're dead. So we have 60 active licenses. And you can tell that 46 of those have been closed since 2009. So if you're familiar with the ARM business model, you know that it takes a long time from license to get into royalties. So the vast majority of those licenses that we have right now, are not yet in products. They are not yet generating units. The wins we have are across some very high volume markets and they're spread. We're not concentrated on one single market, so we have smartphones. We have digital TVs. We have mobile computers. So very widely spread, very, stable business. Last quarter, we talked to you and we said we were number 1 in digital TVs. We're still number 1 in digital TVs. You can see some examples outside. But we can confirm that this year, we will be number 1 in Android tablets. So we will rally in terms of graphic will be number 1 in terms of Android tablets. Now I should clarify this. This is not just Android tablets that you will see reported in the west, This includes all China gray market tablets. So I have an example in my hand. It's not a phone. It's my colleague's phone. It's actually an Android tablet. So this is a tablet designed in China manufactured in China, largely sold in China. You won't see it well. Actually, this one, you will see now, it's available on Amazon and a cost £48 58. So a very, large market in China. So I think there's about 30 million units in the China gray market. So we're number 1 in that space. We're not yet number 1 in Android smartphones. This year, we'll get to about 20%. Right now, I think we're about 15%. But by the end of the year, we'll probably be 20%. That'll put a second or third, in the market. Behind, in this case, a proprietary GPU. And for me, one of my major opportunities is actually proprietary GPUs. So the great thing about all these licenses is you can see that they start to build the volume. So 2010, we had about 3,500,000 units shipping. Yeah. Not that impressive. 2011, we had 12 partners shipping, and they shipped 48,000,000 units. So a very high growth this year, we'll get about 25 partner shipping and will be in the triple figures. So over a 100,000,000 units. So one of the things I said is we're we're leaders in DTV and why are we leaders in DTV, largely because a lot of the main OEMs have chosen our technology. So Samsung and LG designed their own chips in house, put it into their digital televisions, a lot of the Chinese OEMs are also designing around our solutions. We have some very significant silicon partners in this space. We have Mediotech, Amstar, ST and AM logic, who are building, silicon, which is going into entry level, mid level and high end visual TVs and also set top and the reason we're very successful in this market is, is echoing one of the points that Tom talked about. We have the performance density leadership in graphic. So that means we have the best performance per millimeter or best performance per dollar or best performance per watt. Of any graphic solution out there. So that's why we live in digital TV. The other reason we lead is because on the graphic side, a lot of the success and a lot of the product is actually software. So, you have to have very mature software. You have to have very good integration and support around the software, and we do. We regularly get feedback from our customers that our software is very high quality and our support is excellent. So I'm particularly proud of the support that we do, not just for our silicon partners, but for our end OEMs, and their customers I'll show you later. We have a next generation product coming out this year, which will address, larger DTV screen resolutions, so the 4 k by 2 k resolution. So that's coming out later this year. In terms of mobile, I'd say we have a road map to leadership. We're not there yet. We are number 1, or we will be number 1 this year in Android tablets, which is great. But we do need to build momentum in smartphones. Now we do have some very, nice flagship wins for Samsung Galaxy S2, S3, that was launched earlier this month is is a fantastic example. It's well ahead in terms of graphics performance without any other smartphone on the market. There's already 9,000,000 preorders, including one of mine. So go go buy it now. That would be excellent. So that's a nice flagship product. We also have quite a few Semiconductor partners in this space as well. So again, Media Attack, again, AMSTAR, spreadroom, particularly in China, is doing very, nice low cost, and high performance smartphone chips based around our technology. And we think, to echo one of Simon's points, we think we have the right technology for the right market. So in all of the spaces in the tablets, in the super phones, in the entry level in the mid level smartphones, we have a CPU and GPU combination, which, fits well in those spaces. One of the nice things about our technology and one of the nice things about the CPU technology is it's scalable. So you can take the same basic graphics core, they scale from 1 to 4 cores, for example, or in our latest generation 1 to 8 cores, and you can have a single core instantiation it runs the same software. It gives you all the same features. It gives you all the same OS support, or you can scale all the way up to 8 cores and have, the ultimate in performance. So one of the changes we have made in our graphics roadmap is really we've identified over the last year that one size doesn't fit all. In the graphic space, the demands are bifurcating, it's very similar in concept to the way the processor, the processors went. So on the CPU side, they actually triphocated thank god that didn't happen to us. So you now get the application, the real time, and the microcontroller CPUs, exactly the same thing has happened on the graphic side. So we now have 2 completely separate roadmaps, which are addressing 2 completely separate areas. And just as you wouldn't take an a profile CPU and shove it into an M, profile slot, you can't do the same with the GPUs. So the two roadmaps are really graphics. So fairly easy to understand. Pure Graphics and these guys, the customer is there. They just want the ultimate in performance for the smallest cost and the smallest power. They don't want, you know, fantastic or OS coverage, and they don't want all the latest and braces that GPU computes. Complexity. The other roadmap is graphics and GPU Computing. I'll talk to that in a minute, and that's where you're using the GPU effectively as a processor. So it's a parallel processor, but those are fairly complex, and they do take up a little more area. They do take up a little more power. So the market has actually bifurcated. We do have 2 completely separate roadmaps now. So as I said, the easiest one to talk about is graphics. This is where you're using the GPU as a graphics processing unit. You're running games on it. You're doing user interfaces here. We have the best performance density in the market on this. That's really led by our Malley 200 Malley 400 ranges. The example I showed you earlier is a Nally 400 based device, single core, Nally 400 based device, with Nally 400 scales up to 4 cores. Later on this year, as I said, we'll be launching tier. Tier is aimed at higher resolution, DTV displays and more complex smartphones. And there are products on that roadmap beyond here. I'm not going to talk about them today, but we have a continuation of the roadmap beyond the product we're releasing this year. On the graphics and GPU compute side, we have spent the last 3 years developing a completely new grounds up architecture. So what GPU compute does is it blends the parallelism, the multi thread capability of GPUs with the control paths of CPUs. So we've actually taken engineers from our CPU side or the Processor division put them into, our graphics division and come up with a effectively a blended architecture. I think it's very difficult to do this if you don't actually have both capabilities and hats. And it has taken us a long time. I mean, it was planned to take 3 years. It did take us 3 years, and it's one of the, largest investments we've ever made as a company. What this now does is it enables completely new use cases to be run on the GPU. So the kind of things you can do on this are image recognition. You can do gesture recognition. People are using this for new and innovative use cases. Again, these products are out there. We released them the end of last year. We will have I've had silicon in house for a long time. We have optimized all the software on that, so we've optimized all the drivers, all the APIs, and all the operating systems. And we will see, the Maui T 604 and 658 shipping in consumer products second half of this year. So I'm very excited about that. We actually have a second generation set of products coming out later on this year, and then we have Screamier which is our 3rd generation product. So that will release next year. So we're already on to the 2nd generation of this. 3rd generation is next year. So as I said, the kind of things you use GPU compute for are, new, use cases, new ways to interact with the devices. People are also using the fact that you have a complex GPU onboard the chip to reduce cost and systems. So you can, reduce bill of materials by taking DSPs out taking DSPs, off the system and putting that kind of complexity on the GPU. And you can also use it for lowering power. Basically, the GPU compute is a wide parallel processing machine, so you can put the algorithms on that. Run them across all the GPUs, take the voltage down, and you can reduce the power significantly. So people are using it for that as well. Now as Tom said, we have the low power gene. We also have it in in my division. We have moved people from process of division across. So I'm sure there's an analogy with genes and passing. Anyway, anyway, so you would expect our GPUs are industry leading in, balancing performance and power. That's great. I would take that as red. What we've also done, though, is because as an arm, we're supplying the CPU, we're supplying the interconnect, we're supplying the memory controller, as well as the GPU. We've also optimized the system power. There's a number of techniques built into the GPUs, which significantly optimized the system power. This is, accessing external memory, which does cost an awful lot of performance, but it costs an awful lot of power. So we've done an awful lot within the GPU to optimize system power and work very closely with all the ARM components. We've also started to work on what we're calling graphics pops, So if you're familiar, with our physical IT side, you know, we have processor optimization packs, which are really aimed at getting the best performance out of processors. On the graphic side, we don't need the performance boost. What we are looking for is really an area in power optimization. So it's optimizing a different path. So we're bringing those out fairly soon. And clearly, we also have tooling with inside arm. So our system division have tools, which allow developers to see how their applications are running on real silicon, look at the power being consumed by the CPU, look at the power being consumed by the GPU, look at the power being consumed in the system, and then optimize around that. So it's not just the GPU itself. It's the wider system, which actually is where a lot of the, available power reductions are. So ecosystem, we spent a lot of time on on ecosystem. I got 30 engineers dedicated just to ecosystem support. So that's working with gaming developers, user interface developers, apps developers, giving them free tools, giving them content, making sure that they're applications and software are optimized on our graphics. So it's a big big investment for us, and then clearly you could you know, you could have 300 engineers. You could have 3000 engineers. It's like painting the 4th road bridge, but we think we have the balance just about right. Where we do have large numbers of engineers or around about 250 engineers is on the software side. So we have a very big investment in terms of operating system support in terms of, APIs and in terms of enabling external partners. You can see some of the main operating systems up there. You can see Android, Windows, Pure Linux, Chrome. We have others, Python, nucleus, too many to fit on the, chart itself. But we have teams of engineers who are working on all of those areas and who are reporting those operating systems to customer silicon and our own test silicon. And then the API side, you can see there's a myriad of APIs you have to support. So DirectTechs, if you're supporting Microsoft Windows, GPU compute I talked about, it's a great thing. It enables fairly experienced programmers, but not they don't have to be black belts, to program the GPUs, but there are a whole host of languages. We support that's which we then have to support. So there's opencl, there's render script, there's direct compute. There's so many standards. It's really good. So we have a lot of engineers, focused on the operating system side. A lot of engineers focusing on the, API side, and then further out into the community. And those engineers will also work directly with our silicon partners and their end customers. So we will send people out directly to our partners and customers to optimize, the software on their platforms or to fix any issues they find even. Some cases, if they're not our issues. So I think we've done a pretty good job in laying the foundations Graphics leadership, we have very strong foundations in place, which we're going to build on. As I said, any product with a screen represents an opportunity for we are already in leadership positions in terms of BTV and Android devices. We'll ship about 100,000,000 units this year. Smartphones we continue to focus on will be about 20% of Android smartphone this year. We think we have the right technology for the right market, we're getting that confirmation from our end customers. We have the best graphics, performance density on the market. And we have a completely uncompromised support of GPU compute. So one of the things we've done on the GPU compute side is made sure that it supports all the features that customers want, which has been fairly complex to get through. But we've managed to do it. And I'm particularly proud that the next generation technology shifts in some very exciting products. End of this year. So thank you. Good morning. My name is Ian Ferguson. For the last 4 years, I've been running the server initiative for Arm. Been maniacally focused on it for the last 2 years. You've Simon mentioned it earlier that there was a demonstration of the calzeta technology next saw public demonstrations of the the armed technology in the service space are starting to happen, and we felt this was an appropriate milestone to start sharing more of our vision and our strategies, around what we're doing in this space with you. Simon mentioned earlier, but I really wanna emphasize it that I think for me, the key takeaway that I wanna share with you is that like the mobile phone market previous previously, what we see happening in the server market is the emergence of highly integrated system on chip devices that are gonna be very optimized for a specific set of server applications. And I'm gonna talk to you for a few more minutes about why we see that happening, where we see that happening and when we see that happening. Warren said it's earlier that the data center area, which is really the focus of my presentation is really the entry point for Arm Technology into the service space. I personally believe, based on discussions with the ecosystem and end customers that I spend all my days talking to, that actually the opportunity for Arm is significantly broader than that. Especially as we get to 64 bit technology that Tom talked about earlier. So I will touch on some some other areas, later on in the presentation. Okay. So on one of Simon's files earlier, he talked about Cloud Computing. And he talked about really what we see there is companies where information technology or IT is the business. Okay. So what I mean by that is that the server infrastructure itself is the profit and loss generator for that business. And There's a few examples up there. Some of them you might have heard of, Facebook, Google. Yes. But Tencent Baidu, Alibaba, companies in China that are delivering similar social media technologies out there. These companies, because that server is the profit and loss generator in the business, They are very motivated to look at new technologies that will help them make more money. Okay? So Why is that important for us? Well, the way they've set up their businesses is to be very mobile to look at at the adept at evaluating new technology. What I mean by that is they write their software in high level languages. I had a question in the break about legacy code, for example, compared to incumbent architectures in the data center area, very little of that. High level code, as Simon said, people are specifically looking at 1 or 2 workloads. It's not a server where you have to run 50 different things. And, so they write high level code, whether it's Java, c plus plus, whatever, So very portable. And, you know, the other thing that these guys look at is that software is either residing in themselves Facebook have their own specific libraries or Google have their own libraries, or they use open source. So if they see a TCO benefit to migrate to a new technology, it is in inside their own control on how they get there. They're not waiting for a database from a third party software company to go port it. It's under their own control. I brought up a picture there of a Facebook's data center in North Carolina. There's a a parking lot So I've been in the US for 13 years, car park in the the lower end there, and you can see some small vehicles there. And you know how big vehicles are in the US. So that's gonna be a really big building. Right? And as we go forward, what we see and what our customers are seeing is these things are energy constraint. As Simon said, as Tom said, we've spent 21 years understanding energy constrained systems. Okay? This is a battery based, but when you have 10 megawatts and that is what your business is run around, is is energy constrained. It forces you to think of different ways on how you're gonna solve problem. You can't just look at a pure performance vector. Okay. So a couple of examples about what Facebook has been doing. They build these buildings. They've got some in Lat plan. They've got one in Oregon. As I say, this one's in North Carolina. The way they call these systems, radically different from how these things have been done in the past. They're also looking at the structure of these boxes and saying, do I need everything on this board? So the old traditional servers that have these, what they call vanity cases, you know, the plastics that go around it, it actually blocks airflow. So Facebook has said, we don't want that stuff. It just is an unnecessary cost, unnecessary recycling thing when we roll it out So they're looking at how they drive down costs. They're looking at how you can replace these systems more easily in the field when they fail. They're looking at how you cable this thing in a cheaper way. And they're driving a standard called the Open Compute Project. It's for hardware that Facebook will use, but they're also broadening it out. And again, looking at driving server hardware to a standard to drive volume, to drive down costs, to sum this point earlier, Some of our partners, applied micro, were announced a few weeks ago as in getting involved in that. It's a processor agnostic standard We'll see where it goes. But, again, an opportunity where people are looking at doing things differently because they're in an energy constrained system. So let's look a little bit more, about some of these workloads. Walk through is fairly complicated, chart on the right hand side. This came from HP when they did their announcement with Calzada back in November last year, a project they called Project Moonshop. And what they have basically done is done some analysis on different types of workloads and compared how do those workloads run on incumbent server architectures as compared to running on micro servers. And they look at those workloads on 3 metrics. Cost, power, and space. Okay? So the way you read this is if it's to the left of the line, it's a win for your incumbent architect So for example, if you look at that in compute intensive area, if you have an application needs a lot of performance, Simon was mentioning earlier about the the weather forecasting over Tokyo. That's a very mathematically intensive device. Oh, a platform. Excuse me. Now you could build that out of micro servers, but you're gonna need a lot of micro servers down there So what you see there is that the cost of that is going to be something where it's advantageous to use your traditional way of building service. So a couple of takeaways from this. We do see a a a different set of tasks and different variability in terms of use components of micro servers versus incumbents. And indeed, where HP is spending most of its time is around those sort of what they call light scale out applications. What do we mean by light scale out, modest CPU compute, a task that is largely parallelizable. So for example, on web servers, if a node of a server is working on somebody's website, it doesn't really need to know anything about this website next to it. Actually, you'd rather that it doesn't know anything about the website that's running on the same So largely parallelizable. And again, here, as Simon mentioned, it's just running 1 or 2 things. Right? If you if you look at if you were to go into Facebook structure, they have servers that just do one thing, whether it's the front end reading of a query and working out where it's gonna go and direct the query, whether it's, what I call, memcache, or what industry calls memcache, where you just have these big servers, filled with memory because you don't want the delays going to, storage. They just do one thing. And to Simon's point, when you know it just does one thing, There's the opportunity to go and integrate the appropriate level of compute networking and storage around that particular application. It's a space where 32 bit is an entry point, depending on where you go. Some people will need to 64 bits. And in this space, it's largely about addressing. This isn't, again, a place where you need massive compute for these types of tasks. But some people written their applications where they lead a lot of memory space. Okay. So let's just talk a little bit about some of the light scale out applications. I view them as mixing as compute networking and storage. And, really, the mad is how do you find the right balance between those 3? If you're using cheap disc spinning media in Facebook, you don't need a massive Put another way. You need a CPU that utilizes that hard disk to a a high level of efficiency. You don't need something that has way more horsepower than can actually read the data off the disk. Okay. So how do you balance those three things? Inside a system. Compute can be pure CPUs. It can be GP GPU compute, from sort of Pete's division there as as as MPD start to drive that technology into some broader areas, beyond mobile, or it can be hardware accelerators. People look at certain algorithms and can accelerate those more efficiently in hardware than doing it in software. Okay. One of the interesting areas, that I have seen recently is around this whole Hadoop term. Not sure how much how many of you know about Purdue, but it's it's basically a search algorithm, originally came out. The mapreduce technology came out of Yahoo, And, yes, it's used for search queries in, you know, your Google search or Bing or whatever. The underpinnings of how it goes and works out what you need is is using those algorithms. But it's also used by financial organizations as they start to do queries into databases. Maybe not the transaction itself when you buy or sell a stock, but as you build up data over days, months, years, or, you know, big data, the analysts are looking for searching it for patents. Right? They're looking for am I gonna buy this stuff based on this? So that type of offline data analytics, is we feel one of the main places where the initial, deployment will occur. 1 of the interesting trends in the financial areas is desire towards real time to do, so people can't wait 20 minutes for a thing or wait for a batch job overnight. And this is an area where hardware accelerators or potentially, VA hardware can we go in because it will provide more performance and reduce the latency to getting those queries back. The Other area of differentiation is around the the rest of the FSC. As Simon said, we we're still very passionate about what we do, but we have to enable our partners to innovate and differentiate. Some people are using the the cost advantage of the high volume tablet chips and driving that into this sort of service space. Other people are integrating far more service specific functionality down onto the device to provide more robustness, reliability, and a more optimized solution. And, again, you can talk to see Calzada's technology next door. So a broad set of applications, different performance points, different IO, And what that leads to is diversity of devices. So I'm just showing 3 here, from Calzada, TI and applied micro. To the far right, you have a device that, applied micro started to talk about, which is 64 bit, up to 32 processors on an SSC, 3 gigahertz per processor, very high end, 10 gigabyte Internet integrated on data integrated on a lot of integration. At the other end, you have the device that you see next door. And in five watts, you have a quad core, a 32 bit processor, very modest and has taken this completely different performance and power and integration points. And over time, I could have added Marvell to this, As Tom talked about, we have architectural licensees on V Eight. We have partners looking at our Apollo cores and Atlas cores that you'll hear more about later this year, which are our first sixty four bit cores, looking at getting into the space with with ARM based technology. James McNevin, showed this fall last year for those of you who who were here last year and talked about how we go about building software, ecosystems or, let's say, ecosystems in general, and talked about how it takes a long time to build these ecosystems. It evolves over and it it starts and then evolves over many years. If we go forward to today, I think we've made some pretty good progress. There are now all of the critical software pieces you need in place to be able to ship a 32 bit server platform. And we will see server shipments this year, albeit in limited quantities, but boxes will start shipped this year for the sorts of applications I described earlier, web serving, memcaching, feed content delivery networks, Hadoop types of areas. So things like a server grade Linux tech technology, things like a good performance optimized Java Why is that important? If you remember, I was saying that these data center guys write their lang write their software in high level languages so it's more portable. Hadoop has a very large Java component on it, so it's important for us to get a performance optimized Java compile of it. Calceda, the box is next door. They've been running their website. For the last few weeks on that technology, you can see the demo next door. They also showed a number of applications at the developer conference a few weeks ago. They were showing a set of software called OpenSpack, which is actually if you think back to what I said about the Open Compute project, That is the software stack that Facebook is looking to drive as a as an open set of technology to go and drive critical mass around these data center solutions. And the specific applications, there was something called WordPress and no j JS. I'm happy to have discussions about what they are. It's less important about what they are. Really, what was important was that they just worked out of the box. They took the technology in that open source, put it on their open set box, and it just ran on arm. So, again, in this space, relatively little tied to legacy, incumbent code. Now as we go forward, as I mentioned earlier, 64 bit is a place where we actually see the opportunity for arm broadening. Our focus remains in the data center area for the beachhead, but as we get to 64 bit technology, it allows us to go and address other markets that are concerned with energy efficiency or or space constraints. So again, energy constrained systems starting in data centers, but areas of high performance computing. Some areas of enterprises, if you think about New York where they're less about power constrained. It's a little bit about power constrained, but it's about space. People that are wanting a private cloud, not wanting to necessarily put all of their information out into, public clouds like Amazon, but you've only got a small space in your, New York Stock Exchange area or in Japan. How do you go and cram more density around that particular problem. We see opportunities there. Emerging Markets, Simon talked earlier, I think about how we see smartphones being adopted, not just in the US, but very broadly out into emerging markets. How does that technology go out there in spaces, how how do you serve that technology at the other end of the wire in places where there's limited power or very unreliable power? And and, again, real cost constraints. So we see some massive opportunities there where people can rethink service based on solving these problems. So we start the software ecosystem now. We've been working with, Applied Micro, who's one of the pioneers in the space with us, one of our silicon partners. This is one of their FPGA boards down in the the low end corner there. So this is a board that's software compatible with what they come have coming, down the road in terms of real silicon chips, but it allows us to get that stuff out into software partners and get that software ready for when they have devices. And to be frank, when other of our VA partners have their devices too. So we intersect the mark their chips with with software and we move forward from there. Just to make sure I've got everything. Yeah. I've got everything. So really to sum up, we see servers as increasingly becoming regarded as an energy constrained problem. It's starting server market over time will be tied with the fact that more markets will start to view their server challenges as being energy constrained. Why is that important? That's a fundamental thing where people then have to rethink how they build that server technology. Okay? They have to start thinking about what they put in the hardware, they have to think about how they go and integrate to Peace Point. The more you put down to the device, less off chip accesses, you're saving power. So, really, this will be the rise of highly integrated SoCs for server markets. And it like I said earlier, we have a strong track record of playing in energy constraints system. Want to put a little bit of guidelines onto here, and I think Tim will talk to you a little bit more about, the financial modeling to help you with your your different things here. The market size is is a typo here. The market in terms of deployed servers out there, there's about 50,000,000 servers out in the marketplace today. Okay? Less than 10% of that is currently in the data center area. That is the area experiencing the most explosive growth We expect that to be somewhere in the 20 to 25 percent size of the overall server market by the year 2050. 32 bit ARM based servers are gonna ship this year. We've set the expectation that, you know, it's gonna take time. Right? We're at the early stages hardware will go out there. We will find some beachheads, but it's really gonna be several years from now before you see meaningful shipments. What we're lining up to do is see the first 64 bit servers shipping in the 2014 time frame. And as I said, We're building a software ecosystem right now to intersect those platforms that are gonna be coming out in that time frame. In terms of, ASP, a theme that you've probably heard through all of these presentations, I think, is one size does not fit all. We see some people looking to use tablet technology, and those are gonna be devices that are relatively cheap. We're seeing other people, if you look at that applied micro device, very high set of functionality in terms of cause, in terms of IO, you're gonna see a range of ASP points. But we are expecting a range in the 5 50 to $200. And if you need some more granularity on that, work with myself or Ian Thornton. With that, I'll hand over to Tim. Thank you very much. Almost morning finishing. It's almost afternoon. So, I'm on the cup, and we should be about 15, 20 minutes away from Q And A. Long term growth opportunity. I mean, I think pretty much everyone in this room sort of lives in a world of, a flood to adding macroeconomic news every day. We'll be trying to make sense of it. And the world tends to look a different place every morning we wake up. We also operate in an industry, or we operate in industry, you guys invest in and analyze the industry that's characterized by 24 hour news flow. And again, it can be lead to wild extrapolations. So I think it's very good for us, you know, once a year away from the glare of the quarterly or half year or full year results to be able to focus on. Our business model, you know, what that business model drives in terms of industry economics, you know, our low power technology, our progress in graphics and some of our longer term product opportunities. And what I'm going to spend a few minutes doing is try and draw that together as we think about how the financial modeling of Arm out into the future. And I probably haven't done this in this forum, since 2007, when I did, you know, talk about some sort of longer term shapes of the, of the R business model. So so really that that's that's what we're gonna do. And in a bit more detail, just remind ourselves of what we've been building for the last 20 odd years in terms of an installed license base, and where today's royalties and how today's royalties relate to that installed license base. We're going to look at The acceleration, if you like, of, the pace at which that installed base is being built in recent quarters in recent couple of years, what that might mean for future royalty and for future share gains for Arm. Yeah. Most of you who look at our, segmentation slides will be aware that we currently have about a 30% share of the total embedded processor market and maybe we can think today about how that might develop over the next few years. And as we increase that share, which is a unit share, what is happening to arms royalty percentage per chip. Not average royalty rates, you know, across the blended space, that interesting, but it's just a mathematical artifact. What really matters is how much value is our bringing to each of the chips where we're designed in. And then drawing that all together, you know, what does it mean for the P and L? You know, what does it mean for license revenue growth, royalty growth? Talk a little bit about our cost base. So we can understand how the operating margin develops and the earnings develop. And I think you don't usually get into detail about one particular line on P and L, but I think with the tax changes that are going on going on in the UK jurisdiction, I think it's important to understand as we look out at our modeling 5 or 10 years, what's actually happening to the tax rate, because that's changing quite significantly over the next year or 2. So as I say, here's a reminder of where we are today. We've signed 870 licenses, just over 300 companies. Most of those companies are going to end up paying our royalties in due course. About half of them do today. You will see there in the sort of, the the box that we've signed 320 of those 870 in the last three and a quarter years. And they're not really moving the dial. And in fact, in 2011, moving the dial in terms of royalty. 2011, 99.5 percent of royalties that we reported were generated from the licenses signed before 2009. So there's a there's a lot of pent up royalty already, if you like, with the building blocks put in place. Interestingly, over of those 320 licenses signed in the last 3 and a quarter years, 80% of them are Cortex and Marley, and also, although 3 20, 25% of them are either Cortex A or Marley, and therefore, typically characterized by a higher percentage royalty per chip than we have traditionally been used to with RMAT and sort of 1% plus. You know, we're now moving, as we discussed in recent quarterly presentations, beyond that, and we'll and we'll look at that. And what this license base has driven so far is, or in the last 10 years, at least, a royalty CAGR of 24%. Obviously, you know, well well ahead of the industry rate, and we'll look at that in a bit more detail as well. Again, followers of Arm who track quarter to quarter and try and, develop direction about how this investment proposition unfolds, will I think have become used to this slide, which is our attempt to share with you what designs, what licenses, and therefore, what designs into how many semiconductor companies are important for us to increase our market share. And what that chart is basically showing you, those round blobs represent semiconductor companies. And, you know, we believe that we need to turn all of those Rob's blue to have an 80% plus share in each of our target markets. And you can see from there, as you would expect in something like smartphone application processes, it's mainly a blue picture. Some of them are a combination of blue and green. Green is these companies are shipping some arm based chips. Yellow is companies that have announced designs on arm, that may not yet be shipping. And the reds are the things we need to go after to get them, arm, arm shaped. And so and on the right there, the 2007 share shipments, that is by segment analysis of the 30% that I referred to earlier. Just a little bit of a color work here for those who are bored with, you know, reading words and looking at numbers. Little, if you sort of take away the, take take away the segments and just look at the blobs. You've got a 108 major designs there that we need to turn. Ultimately blue, but from different shades of, red towards towards blue. And you can see that half of them almost are are pretty much there. And, again, putting that in a e easy to understand grid, that's kind of how it looks at the moment. And our goal is to get that nice blue shade moving from left to right. And we believe that looking at talking to our customers and our customers' customers, talking to our in house teams and our commercial folk. We believe that in 2016, that grid looks something like that. You know, 4 49 blues have turned into 62. There are only 6 reds hanging out there. That we need to go and turn. Now clearly, this is a bit of crystal ball work and it's directional, but this is actually based on our best estimate of of how the market is thinking about deploying armed technology over this period. Licensing is obviously a precursor to share gain. It's actually a little bit better than that because as most of you will know, many of our licenses are perpetual licenses. Which means that you take a license to an arm design, and you can design it into your chip for as long as you are prepared to pay royalties. Therefore, for Arm to be generating a new royalty opportunity, you don't necessarily need to see a new license. You just need to see semiconductor companies getting more leverage and deploying existing licenses more. But you you tend you will see, more more licensing. Now so 2016, we put in their market share 40 to 50%. I mean, sounds sounds quite handwavy, but if you look at 2011, I said 30% 5 years before it was 17%. It's been growing at, on average, around about 3% per annum, a little bit quicker actually in, in the last year or so. And I think with the opportunity, the very high volume opportunity in microcontrollers, there is a reasonable argument to say that our increase in penetration is going to grow at a rate that is higher than we have seen historically on a volume basis, because of microcontrollers. But we see a world where, let's say, 3%, 33 to 3 to 4% over the next 5 years, we see our 30% going into that 40 to 50 range. And this of course is an increasing share of markets, which in themselves are growing. And will continue to grow in this period. And actually if you look out 5 years beyond that, which I think you need to do when thinking about We see a world where those markets actually continue to grow. Some of the areas where we have a very, very high penetration to date given competitive environments, etcetera, you know, we expect the market share to be flatter But basically across most of those end markets, we see our continued to grow looking way out. And I didn't want you to leave you with the impression that once everything was turned blue or green, it was game over. Because actually, actually, the world is a very dynamic place, and you can see that some of the items on the right there, some of them have been touched on this morning, others not in much detail. But the things that we currently include in the segment chart that we show you, that is not the end game by any means. And every time Ian and Jonathan update that, new things get included, not not just because of their own personal decision, but because there are new products out there that are capable of deploying sort of technology. So I think, you know, there's going to be much more opportunity when we get out to 2016. As we increase this unit market share, what is happening to, the value per chip And then fundamentally, this is an outsourcing business. You know, we are substituting for our customers, fixed costs in their business by way of engineering headcount largely, with variable cost in the form of licensing and royalty. And basically, the more sophisticated the processes, the more work needs to be done by our customers, would would be needed to be done by our customers to do it. And therefore, the more value we are saving them by providing an outsourced option. And in that environment, our customers are they understand that, you know, if there's if there's more cost for us and more value to them, that they will pay more royalties. And this is why that graph is the shape it is. You know, as we've moved into a world of complex processes, a class processes, moved into world and multiple processes like the big little concept that Simon talked through, these are attracting higher royalty rates. So, you know, 5 years ago, I was sitting here, we'd be thinking 1% plus for Arm. Now we're thinking for the general purpose processor itself, 2% plus or minus. We're talking about a world of graphics where, you know, Peter's explained the trajectory we were on. That typically brings another 1% on top. We've talked about attack rates of, physical IP and optimization packages. That brings a further royalty again. And the next generation V Eight will be for the same value reasons looking to continue the the trajectory. So, yeah, as we look further out, you are you are seeing a world of, aren't getting much more value per chip. Before I look at the overall picture, just a reminder on what is actually going on, with this with with a tax environment in in the UK, We're forecasting about a 25 percent normalized effective tax rate in 2012. The UK Corporation tax rate, as I'm sure most of you know, is already being legislated down. It it dropped down in April 12. It's going down again in April 13, and it's going down again in April 14 to 22%. More importantly, for Arm, the Patent Box tax regime is being introduced from April 13. And fundamentally, what that means is that for profits arising from qualifying patterns or qualifying profits arising from patterns, they will be taxed at 10% rate. Now look, clearly, there's a lot of devil in the detail about what specifically constitutes you know, a relevant pattern and a qualifying profit. But, you know, suffice to say this legislation is aimed at companies like Arm, who, obviously, the UK government wants to encourage to invest in this country rather than all of the other places around the world that Arm could invest in given the talent pools that around the world. It comes in at April 13. It it is being implemented on a transitional basis. So the the the total benefit that a company like Arm will get in the end, 60% of that benefit happens in year 1. And the remaining 40% happens 10% per annum for the next 4 years. The little graph on the bottom is not a very sophisticated way of showing that tax rate is going down, without putting specific year on year numbers because we all know there are lots more things that go into a tax rate on an annual basis than just this one. But, you know, if I was to put 1 more level of science on that graph, I would probably have the rate going down a bit more in 2013 2014 for the reasons I just said about 60% and then flattening thereafter. But essentially, as I said on the Q1 earnings call, in 5 years time, arms tax rate should be based on what we know today, sub-twenty percent. So long term growth opportunity, 2007, I stood up here and painted a picture of license revenue growth that would be mid to high single digits. And in fact, in the 5 years prior to the downturn, CAGO of license revenue was 9%. I also painted a picture of royalties growing at Broadly 2x the rate of licensing and typically well ahead of the industry. So, you know, mid mid teens or, you know, a little bit more. What what's actually happened, since we talked through that is that life and things actually grown. Looking back over 8 years and other 14% compound growth rate, obviously, quite a lot of that pickup has happened in the last two and a quarter years, where partly due to bounce back out of the downturn. But partly because of the increasing utilization of ARM Technology across these broadening end markets we've been talking about. Licensing has been growing faster than that. And royalty has been growing. As we say, there, I mean, the industry over that period has been growing at about 7% per annum. We've grown at 22% on the royalty. So at the top end of our 10 to 15%, range. From a an operating margin standpoint, over that period, we've gone from 20% to 45%. Leading up to the downturn, was had a margin in the very early thirties, you know, for 3 or 4 years. We've now seen a significant injection, partly, of course, because of the higher than trend run rate license growth we've seen in recent periods. But also because of this this this royalty growth. And that was all driven in earnings CAGR in the last 8 years of 27%. So I mean, you know, where where do we go over the next 8 years? We see a world again. I mean, we've been consistently guiding license revenue growth to still to still be in that sort of 5 to 10 percent on top of this higher base that's been built rapidly in the last two and a quarter years. When we started growing licensing at 30 to 40 percent, the main question that I was getting was, is this sustainable? Is it a one off, you know, is it pent up demand out of the downturn? Is it everything coming together in a glorious fashion, then it's actually going to ease down. The answer is no. We expect trend to license revenue growth on top of the the base that we have built. We also expect to see our royalty growth, our royalty revenue grow in a similar way to the way it has in the past. You know, 10 to 15% higher than industry growth. You can see in the last 8 years has been at the 15% end, of that range. So that's what we see, you know, looking out longer term. I mean, from a margin standpoint, we have this conversation, obviously, a lot with investors about, you know, where is this in 2007, I stood up here and said, when our margin was 31, 32%, that this business is capable of sustainably supporting margins of 40% and above. And of course, everyone said when. And I said in the medium term, And, it turned out I was right. Look, because in 2010, we went through 40%. Maybe we would have gone through a little bit quicker if it hadn't been a downturn. So no. 201145%. And, of course, everyone asks us now, you know, what is it gonna be in 5 years' time? And I think one thing we can be fairly sure of is that it goes up into the right I think the question is, you know, is it 50 percent? Is it 55? Is it 60? We'll really depend on partly, of course, the rate of penetration of these markets that we've been outlining. But also, you know, what are our what are our investment opportunities in the out years to develop more technology to generate more licensing and more royalty. And we're not managing this business for the highest possible margin in the short term. We're managing this business to be able to grow our overall profits and cash flow optimally, and that may well be more likely shape of a 50% plus margin rather than a 60% margin, you know, we'll have to see. But there's nothing that we can see in terms of the trajectory of the cost base and the need to invest that is different from the model that we painted before. R and D costs are going to go up in absolute terms. You know, you've seen this recruiting about 10% per annum in headcount in the last 2 and a bit years. We're going to continue to invest as necessary to access the opportunity. But that is all within the overall shape. You're going to see periods of harm where we are quite flat on our headcount. For 3 years, 20,789, our headcount was flat. We had a big year of investment in 2006. We've had investment in 20 1011 and the start of 2012. So you're going to see it go a little bit in, you know, in periods, but generally speaking, there's no change to the relationship between our cost base and these revenue projections. That means that our margin continues to grow over time. And from an earning standpoint, that revenue growth, that margin enhancement, and, of course, the boost that we're gonna be getting from the tax rate, I think, you know, sets a good foundation for our earnings, you know, going forward. To be, you know, consistent with what we've achieved in in the previous 8 years. So that's kind of how I would update, you know, what I said in 2007. So in summary, before we move to Q And A, you know, the the reach of ARM Technology is broadening rapidly. We know that it's been it's been driving licensing in in in recent quarters. The guys have outlined, you know, some of the markets that are underpinning that. The installed base has been growing steadily for a long time. That growth has accelerated in recent years. We're now reporting license revenue at 2x the level that we did 2 years ago. The order backlog, which is a contractual order backlog, it's not a discretionary drawdown item, is more than 2x what it was 2 years ago. So that underpins continuation of that trend, and that is driving long term royalty opportunity. We're increasing the value because we're bringing more to the party. The government is being helpful. And all of those things are driving, a very promising outlook for our earnings growth over the next few years. Thank you Thanks, Tim. So, we are going to do some Q and A in a moment. This is slide 69 in the pack. Obviously, 69 slides is quite a lot to remember. So, if you just had to take away a few slides, from the pack, then we'd say these are the the 4 key messages, to take away. The first is the importance of arms partnership business model. That's a key differentiator. That's what delivers, the innovation and the economic benefits And we have to partner with a huge range of different companies, right from manufacturing technology, to to high level operating systems. The next thing to take away is that the growth of this business comes from amongst other things engaging with new partners, new customers, new markets. And there's a huge range there, whether it's changing the way people mix their concrete, and we have smart intelligent concrete, right through to changing the way people people design their servers, going forward. Whichever end of that spectrum it is, we're bringing arms low power DNA to the party. And, that delivers, greater benefits to our partners and their customers. The example on this slide there is a big little slide an example of, the system design, but we could have also chosen other design other other slides as pack where we're bringing our low power DNA. Start over in the front left corner there. We've got some microphones going around, and we'll try and keep up the pace. Hi, Pam. I'm trying to go back to Simon's, presentation, slide number 6 where you describe the multi decade disaggregation of the of the Semiconductor Industry. Obviously, a very long term trend But, if you look at the current, the the 2 big successful handset OEMs, Apple, and Samsung, there's an element of, of actual vertical, going back to vertical integration, both with application processes, and within Samsung's case, of course, also, memory. And I'm told they're even interested in baseband. Is that how how should we look at Start over in the front left corner there. We've got some microphones going around, and we'll try and keep up the pace. Namira. If I go back to Simon's, presentation, slide number 6, where you describe the multi decade disaggregation of the of the Semiconductor industry. Obviously, a very long term trend But, if you look at the current, the the 2 big successful handset OEMs, Apple, and Samsung, there's an element of, of actual vertical, going back to vertical integration, both with application processes, And within Samsung's case, of course, also, memory, and I'm told they're even interested in baseband. Is that how how should we look at that? Those, 2 features in the context of the long term trend. And I think, yep, to every rule there are exceptions, of course. But I think the thing to look at is to get the most out of this, those who are going to lead going to understand the complete supply chain from top to bottom. And I think that's the really important thing. It isn't just a case of taking what supplies give you building it together and and shipping out a product. It's about understanding how the software works and how the transistors are made and how to get the most out of that all the way along. So, you know, sure, there are going to be some companies that do integrate. You know, some of those people that you mentioned manufacture, others don't. But the key for me, I think, is understanding the whole supply chain top to bottom, whether you have to do it all yourself or not, I don't think you do to get the most out of the cost benefits of disaggregation. But I think to get the best solution, you do have to understand every step along the way. Francois. Yes, thanks. So Francois from Morgan Stanley, the first question, and I've got several, the question is about production capacity, will the ARM partners have enough production capacity to produce chips based on arm at 28,000,000 better on below? Or is it the case that at some point, they will have to bake intel to get their chips at a much higher price. So that's the first question. The second question is about Windows 8, yes, we are there again. Very simple question. Does it work? Does it work well? And what incentive for OEMs to use ARM over Intel for Windows 8 tablets in particular? Is it just power consumption? Is it because they would generate profits? I always with Intel, they won't generate any. So if you could elaborate on the those few questions on the Windows 8. Okay. Let me talk about Windows 8 while Simon's coming up with an answer on on capacity. So, you know, Windows 8, isn't important to say this is a Microsoft product, Microsoft are, controlling the launch of this product. From what we've seen of the product and we have played with, with the products, of course, it works. It, it works very well. It's a nice, nice operating system, and I'm sure that they'll find many customers who who want to use it. In terms of advantages of, arm versus, versus incumbent designs that that's already used the Microsoft operating system, then, yes, low power is absolutely an advantage in, in these a product, like, for instance, tablets, like, thin clamshells, keeping the electronics small, is very important. On-site of the example of the very thin television out there as well. Another example where keeping the electronics small is important and low power, is the key to that. But I think we also talked about the business model delivering economic benefits. And, we believe that the, innovative yet cost competitive supply environment that comes from the Arm business model, will certainly be advantageous for people who are building, Windows based products. And those people at the moment, of course, don't have, as a benefit of, of that supply environment. So it's going to be a new thing for those manufacturers, and that certainly a benefit that they'll be getting from it. Your other question was about manufacturing capacity. Yet, but I believe beyond partners are going to get enough capacity for 28 nanometers and beyond. I mean, whatever issues exist today are going to get solved there's a lot of capacity being put in place around the world by many different companies to fulfill demands for the future. Yep. Good morning. Sandeep Deshpande, JP Morgan Gasnu. Firstly, a question to Pete on graphics. You've talked about these 2 different streams of graphic processes that you are you are getting into. Would you say that, I mean, that, I mean, you've you've had a key market share in the TV graphics market that it's having these 2 different streams is going to help you in the handset smartphone market to gain share. And then a follow on to that, would be what, how should we be modeling the royalty rate in graphic is it a different way from how you do it in the microprocessor? How should we be looking at if, I mean, given that those products will have ARM Processors as well. Will there be discounts on the graphics processes or graphics processor when, when an ARM based So all multiple arms are on that same chip. Okay. And let me try and answer both of those. So in terms of smartphones, getting sure you you you asked about the 2 different roadmaps we have. Then yes, you can see smartphones are segmenting superphones. There's mid level phones. There's entry level smartphones. There are smartphones at all points. And having the, widespread all product enables us to target all of those markets. You wouldn't take one of our top end GPU compute cores and put it into an entry level smart you're not going to get the benefits out of that, and you're going to get some overhead. So yes, it'll help us gain share in, smartphones. Terms of how you model it, it's just the same as the processor. It's exactly the same, financial arrangement. It's exactly the same licensing arrangement. And as Tim said, they do tend to, you get royalties for the processors, you get royalties for the graphics. Clarifying that because on the process, as we understand, that subsequent processes get discounts on the processes. So would this be classified as a subsequent processor on the chip? No. Short answer. No. It it it it would not be It's an incremental royalty as, as presented on, the slide, in in Tim's section, I think slide 65 64 in the pack. And we're also sticking to the principle, and we're starting to illustrate that in slide 64 on the pack as well. But, you know, more functionality in the graphics process, sir, means more value added by the graphics processor. And so if there's more value added, we're replacing a higher cost that would otherwise have to be done by an internal design or from an alternative external supplier. And, that means an opportunity for increases in the incremental royalty as well as the base incremental royalty from the graphics process. Let's have the next one. We need to keep cracking through these questions because quite a lot towards the back of the room. Gunnar Plager from Citi. Could you talk a little bit more about your structural power advantages and idea of combining different costs. To what extent are there barriers to entry end? Do you see any adoption of this in your competitive landscape? And secondly, from the moment you've developed process architecture to putting it into silicon, and I think you about this that you're working with foundries at 20 nanometer, 40 nanometer. You're developing a lot of know how. And I was wondering you're monetizing this at the moment mainly through sometimes hard macros, mainly through these performance optimization packages Do you really have the feeling that you efficiently monetize this know how or are there any better ways and, new business ideas? Thank you. Tom, do you want to do the first one and assign another crack at the second one? So the the the big little concept, and are there any I think the question was really are there any technological barriers The answer is, honestly, no. That's one of the really smart things about it because, today's phones embrace 2 things. They already embrace MP course, multiple processes. The other thing they already embrace is they have the intelligence to do this thing called dynamic frequency and voltage scaling. So as the software load goes down, the system's back off, that basic control capability, is all you need to enable the big little So that and the MB and the MP capability of enablers, they're already there. And the software is over and above that completely unconscious of the switching that's going on. So there are no barriers. To the question of adoption, I think today, to have both the A7 and the both and the A15. And product is in the pipe and coming through, we have silicon in house now. And so it's just it's just a question of a few months and and things will start to emerge, I think. Simon, you're going to be on the monetization of physical IP. I think there's 2 things to look at. The process optimization pack really does help a lot of our customers get to market sooner. So that pulls through a royalty stream that we get on our processes earlier. And if we can help more of our customers deliver higher performance and lower power, have more competitive products, that is just generally good for arms economics. In terms of the actual pricing, the way we do the process optimization pack, we've had these products in the market a little while now. It feels like we've got the level of license fees, the way the royalty works, about right, to ensure that we do get good uptake and continue good relationships with the foundry. So kind of happy with with how that is working. Hi, it's Didier Sandbach from Merrill Lynch. A couple of questions. Maybe first question is related to the above 90% market share by 2016 in smartphone apps processes. What I'm wondering is, what makes you comfortable you know, putting these targets or even this prediction out there, you know, given the notoriously short cycle for handsets and obviously, the entry of intel in this marketplace. The second question is related to the PD licensing CAGR in the high single digit. What are the reasons behind that number? And can you talk whether the potential for licensing with analog and sensor companies are encapsulated in this number. Thank you. Thank you. You wanna do that. So both, Tim, or you do the same one? Yeah. I have I'll do the first one then. No 90% share that we we talk about in 2016. Well, you know, who knows exactly what that share is going to be today, we know that it is to all intents and purposes a 100%. And you know, we all understand that, that that Intel have introduced them, some much more power efficient chips and you know, these chips are getting design ins into smartphones. And we believe that they will continue to get design ins in some smartphones. We've played with the Zolo phone. It's perfectly adequate phone. It it it does the job. However, you know, as and when until, chips get even more competitive, with with arm chips and, you know, the still have a couple of generations behind arm chips at the moment. But as they get more competitive, then, you know, they will continue they will become one of the about 20 suppliers who, supply chips into into the phone space at the moment. And, you know, on a purely arithmetic basis, they will get some share. But by 2016, we don't expect it to be any bigger than than arithmetic suggests, which is, you know, in the order of 5 to 10% and hence, greater than 90% number. Sorry, Tim. Yeah. I mean, on licensing, I mean, that's obviously Well, the way we do it is we look at, our existing licensees, we look at what we think those existing licensees will want from our technology. So if you're an existing licensee, operating in one vertical, you will be coming back to ARM every 2 or 3 years to upgrade that technology. That drives additional licensing. If you're an ARM license, see that has increasingly and will probably more take arm into other end markets, which is actually most of our semiconductor licensees, you'll be coming back for different flavors of ARM technology over time and that we model that out too. And of course, to your last point, we're trying to identify at least in terms of scale, new companies that are likely to be able to take advantage of ARM Technology as these new markets open up. And when we model that out, as we did in the 2007 timeframe, we envisage a period over time of sort of high single digit growth. Now in reality, you're going to get periods, which may be related somewhat to our product cycle, or our engineering delivery work or even the macro environment where it's going to deviate from that. Sometimes it's going to be much stronger that you've seen recently. Others in like in 2009, it's going to be negative. But when we look through it, that is that's a pretty detailed exercise, which will obviously wrong in sort of in the granularity of it, but that's kind of how we do it. So it is actually based on a fair degree of science and understanding of how the Semiconductor industries will want to deploy our technology. Thank you. I'm Rish from BMO. 2 very quick ones. 1 for you, Pete, to clarification, is the roadmap on the GPU compute points us to going after the discrete graphic business as well? No. No. I don't think we're, well, we do not intend going after the script traffic. That's correct. And then one for you in, again, blocking and tackling 1, which is, on the server roadmap is virtualization, and I believe being aware as a partner, is virtualization there, the support there, or what's the timing for that? Question. So, from the A15 onwards, we have hardware virtualization support. So the the court that Tom talked about as we move forward into V Eight, we'll have hardware hooks. So we're traditionally seeing in that data center area, other virtualization, things like Zen KVM initially, but certainly we we have a partnership with with VMware today, and we'd look to extend that hopefully into the service space so that Indian comes out with there, so they can it'll have a virtual Yes. Yeah. They've announced it as hard with virtualization. Okay. And I'll go with the trend of going to the hard one with Simon. Since that transistor cost on a nice little linear curve that Intel showed And then obviously, you guys are not standing still and you have the architectural innovation. So what's the right way to think about it in terms of a framework, whether it's at the same power x performance, and just help us out there. So first question is, do you subscribe to that that the foundry camp is gonna have a difficult time and you yourself said that it is getting harder as you go down the node. And so, a, do you subscribe to that, then the answer is no. Then what is on doing with the architectural innovations that kinda helps, to offset that advantage that, so called advantage that Intel has. Thanks. So I think the road map for process technology in the foundries is pretty clear that they're all going to, introduce Impets at some point. I mean, they've all come out and said that. The question is about when question is about how a particular process technology is suited for the type of product that you are, going to wrap it around. So if you're building an SoC, today, people typically mix up transistors. There's a lot of analog integrated onto a digital chip. Doing analog with FinFlex has some new challenges, how you can get all the IP in place to support an SOC industry. It's going to take a bit of time. And then there's a question of getting the mixture of performance and power consumption at the right point as well. So, I think, yeah, FinFETs are going to come along from the foundry players. And it's about putting together the complete package of technologies that you need to enable an SoC to then be built using those technologies. So if it's going to happen, there are, you know, clearly manufacturing new sets of manufacturing challenges associated with that. But it's not as though the foundries haven't been looking at this problem for a long time. I mean Intel did not invent sinfets, they came out of University of California at Berkeley a long time ago, the guy that pioneered the research on that used to be TSMC's CTO. So it's not as though, that this technology has just come out of Intel and everyone can scrambling to catch up, it's been around quite a long time now, and lots of work's been done across the industry on on how you how you obtain them, and how you get them, usable for the right type of product. Thanks. I think it's Scott from RBC. You used the chart a couple of times where you're segmenting, the smartphone market into super phone mass market and entry level. Could you just give us a bit more of an explanation of what you mean by those? And in particular, the amount of armed content, that you're expecting in each of those 3 segmentations, either by numbers of chips or preapproved by value. I know it's not an exact science, but it's interesting to hear. Yeah. Yeah. I think, I mean, this is this is something which is going to change as as smartphones evolve. You know, a little while ago, we had feature phones and we had smartphones, and then we talked about, okay, really high end smartphones and simpler, more basic smartphones, and now we've sort of got got 3 levels. So I think what we mean by the entry level smartphone, is in a few years' time, that's going to have things like the A7 processor, in it that, that Tom talked about in his section of the presentation, It's gonna be targeted at, you know, low price. This is enabling the next billion people to, to connect to the internet with with an entry level smartphone. And the super phone is going to have GP compute in it it's going to have big, little, and it'll probably be quite sophisticated, big level little implementations, you know, may maybe 2 big cores and 4 little cores, those sorts of things showing up, may even have multiple graphics engines, as well. This is going to be the highest price type smartphones that are bought in the developing world by the people that have to have the latest and greatest. And these chips will be interchangeable with the chips used in, tablet and, and and computers. They will be effectively the same chip. And and then you've got something in between, which is for the slightly more cost conscious, but still quite sophisticated user, and that's what we're defining via our middle middle range. So from a financial point of view, the entry level phone is going to have a modem and an applications processor in it. And an applications processor, you know, it's gonna be a low end apps processor in the $10 to $15 range. At the high end, you've got an expensive applications process, lots of other chips around it. You're probably getting towards a multiple of 3 to 4 times the, the the the first one. And then be in the in the middle one is where most of the volume will end up being, and that's your $20 chip. You're rated. This is your 20¢ to $0.65 range across those. This is what I was quoted saying on Monday, Tuesday. Yeah. Great. Thank you. And I have one more question. Just could you give us, you mentioned two things on the graphics process, sir, you talked about, you know, closely creation with a CPU, you talked about low power as being Marley's key characteristics, where you've been successful and won against your competition, what would you say it was made them select, Marty? Some customers have chosen us because we, we have the best, power and the best performance density for our power. Other customers have chosen us again, the roadmaps are different, right? Customers on the GPU compute side have chosen us because we've made no compromises at all. You can have full profile GPU compute running. You can get every single OS supported. So it depends on the customer. Some as I say, it's low power, some its functionality combined with low power. Thanks. Steve O'Connor. Question for Simon on the manufacturing side. It's something in your discussions with, foundries. How confident are you that, they can get back onto the, the shrink road map once again, or do you think there's a risk that going forward at the lower geometries that the the gap between foundries and Intel is going to, could extend a bit further and maybe potential risk there for market share. And a second one for, for Pete on the graphic side, Pete, you spoke about a focus on proprietary graphics. Can maybe you can give us some time line when you might update us on that. And, also, if you could just speak briefly on your direct tech support. Thanks. Okay. So I think in terms of the shrink roadmap, from 28 to 20 to 14, I think that that is going to happen. I don't think there's a, I don't think there's any notion that that roadmap has stopped at all. There are some, challenges facing everybody in exactly the same way who's trying to manufacture about the equipment that enables a shrink to the new node. Everybody is adopting double patterning for the 20 nanometer point. Because EUV hasn't come to, industrial scale production, and still isn't, and doesn't look like it's going to be a way off That's going to impact everybody, whether you're, a foundry or an IDN. It's going to, it's going to impact everyone. As I said a moment ago, the foundries need to, the foundries and Intel have different business models. The foundries are supporting 100 of different customers. They're running many, many different processes simultaneously in their fab. They're able to do that in a very high yield way. And they were able to offer a very cost effective, dense high performance solution. So there's a whole load of trade off to support that business. And that has underpinned the SOC industry for the last 20 odd years. And I don't see any of them stopping that. Nobody, as far as I can see, is kind of throwing in the towel and saying, you know what, it's all too hard if I give up. That is just not happening. If anything, I see the focus on R&D development going up, and not going back. And next, I'll just take the graphic questions quickly. So we had one on the proprietary 2Q with the one on the right thing. I think as I said, one of our main opportunities as proprietary GPUs. And I think what we're seeing on the GPU side is, it's very similar to what happened on the CPU side. Simon said, there were a lot of proprietary CPUs over time, gradually people realized that outsourcing and doing a buy versus make decision. It was just better to buy. We're hoping we're going to see the same on the proprietary GPU side. In terms of direct tech support, we have full direct tech support. We have support for Dx9, we have support for DX11.1. The hardware is available. The software is up and running, and we're ready for OEM launch. K. I think that we're moving back there. Somebody has a microphone, Karen? Yes. I've got a few if I could. I just want on the cost side, Tim, you provided some very good revenue signals. And I just wanted, given the proliferation into a variety of end markets, given that the PC OEMs aren't used to maybe, the business, same business model as they're now discovering. What you feel, on the cost front going forward, whether you feel that you can grow cost at, you know, whether you feel you have to grow cost at slightly more than half your revenue growth, or whether you can actually whether those costs will be borne by others, in the industry. And then secondly, I just wondered if talk about graphics. You mentioned graphics pops. You've been very clear in terms of, you know, the benefits of pops historically, and I just wonder whether you could maybe give some, some of the benefits that you see on on power consumption, etcetera, on on graphic spots specifically. And then finally, just on Intel pricing, pricing versus Intel, you put up the interesting slide earlier, about $20 versus $100 for CPU. It's about 5th. Can you tell us how you see that trending over the next 5, 6 years? Thank you. Let me do the first one and then the post. You do the cost. You do the cost. Yeah. I'll do that. I mean, all the costs, guys, I mean, it's kind of what I said when I was standing there, which is I don't see any fundamental change, in the shape of our R and D trajectory, which is why I think the operating leverage still comes through. But I did make the point that we will obviously be investing to optimize our opportunity. And therefore, if we see the need to invest in certain things that have appropriate returns. This is why I said, maybe 5 years' time, we're more valuable at 50% margin than we are at 60%. I think we just have to if we don't see anything, our model, the way we go to market, the way we operate with our customers and the ecosystem doesn't change. I mean, clearly, we need to grow. We need to grow our infrastructure within the business. We need to grow our commercial fleet on the street, but this is what's been happening, and this is what we're taking into account. In the guidance, but I don't see the model changes shape fundamentally. Okay. And on the graphics pots, really good question. So, I think one of the questions earlier was, are we going to go into discrete graphics? We'll know the things that's driving our, increased complexity in the roadmap is their new, performance requirements out there. And the size of the GPUs are increasing constant So what we've done with the GPOS, the aim is to take about 10% to 15% of area and power out of the GPUs. And the size, of the GPUs, you know, that's worth anywhere from $0.50 to a dollar, per chip. Okay. And you had a question about the pricing chart that we showed there. I think it's important to stress that Now, armed does not sell chips. Ask them to conduct a partner's sell chips. And, you know, the the process at which they sell them is up to them and and not up to us. What Arm provides, though, and what what we showed on silent's slide was that Arm provides, a business model, which delivers, a whole ecosystem that encourages innovation and generates a competitive supply environment. And when we look back, what that's done for the handset market is has enabled, you know, a huge increase in functionality, and still produces chips, that that gets sold in the sort of $15 to $20 range. And as we look forward, we can see, you know, much greater functionality going into smartphones. And we expect that same business model to deliver the competitive, pricing environment. So people will still be able to buy smartphone chips, for around $20. When that smartphone chip is capable of doing everything that it takes, to drive a PC, then it's very much up to, you know, the supply, and and the market dynamics between the people who are buying the chips and the people who are selling them. To say, well, if I can buy a smartphone chip that does everything I need for for a smartphone chip price, then that's what I'm gonna pay for my smartphone chip that I'm gonna stick into, into a mobile computer. We'll we'll have to see what what actually plays out, but, you know, that's what the business model delivers. Yep, we're moving towards the back of the room now. We have about 5 minutes to go, okay? Thanks for taking the question. 2 Vignesh from Investec. Just a quick one, Tim, in terms of the royalty outlook you put I'm quite interested why you, didn't sort of move up the lower end of that of that 10 to 15 range in terms of growing excess of the industry, just looking at the licenses that you've signed in the previous few years and those royalties obviously yet to come through in a material way, you know, taking market share gains, wouldn't it be normal to sort of assume that maybe you're looking more towards the higher end of that range rather than the lower end of that range on those dynamics. Well, as you know, I try position myself as a cautious sort of guy. And I mean, you saw from the last period that we did actually the outturn was at the very top end of the range. But I think when you're looking at crystal balls so far out, I think, you're getting caught up in the excitement of these sorts of occasions. Can take you into areas where, you create hostesses to Fortune. So I think as long term guidance, I think that's right. But I did say that if you look at the rate at which we are gaining market share or likely to gain market share in those markets could well be at the upper end of what's been normal But obviously, some of that comes from the very large microcontroller unit opportunity, which comes at a lower royalty purchase. Okay. We we have time for 2 or maybe 3. Let's see how quickly we can go. Yeah. Thanks. It's Brett Simpson atarity. I had a question really on the, on the Cortex A unit shipments. They seem to be on a quarterly basis, at least, they're getting dominated by 3 players principally Samsung Qualcomm and Apple. And and it's and it's happening in a way we haven't seen before in the industry, and it doesn't look like many other chip makers have much prospects to make money in this environment, given how much they're taking share right now, I had a couple of questions on that. How does arm see this trend sort of building? She would be expecting a sort of shake a shake out in wireless semiconductor? And if so, how would that really impact your licensing business? And then the second question, are these three players that are doing so well right now Are they paying the same royalties to arm that the rest of the market will be paying? Thanks. So I sort of delve off on on that one. I think you're right. I what people pay royalties to Arm is we talk about a band, and you talked about, a very small number of conductor companies there. So we're not gonna get engaged in a discussion about how much individual companies companies pay. But, you know, everyone pays within the bands that we talk about when we when we talk about our royalty rates publicly. And that means the core tax aid processes you know, they pay more than, they pay for processes that are less than Cortex A, And, you know, typically, Cortex A, high end processes now are commanding royalty rates, getting towards 2%. I think, in terms of, do we see, do we see multiple players able compete in that space. Yes, we do. In fact, I presented a slide yesterday, and, you know, we were talking about the mobile ecosystem and you know, picking out Cortex A, partners there. And the reason that I talk about roughly 20 players supplying into this pace of, you know, mobile phones and mobile computers is that when we look at the people who actually licensed core XA product, and who are either shipping or whom we know have serious plans to ship. Otherwise, they're committing commercial suicide they've invested quite a lot of money in their development programs. You know, then the number is about 20 players. And so, you know, I'm sorry. We don't quite vibe the theory. Is that, just because Apple and Samsung have a very high share of the smartphone market that that translates into what happens with people who are shipping Cortex A products because Cortex A goes into a whole load of other products besides the high end smartphones, that come from Apple And Samsung. So, sorry to shatter that delusion. Okay. Thanks. Thanks, Warren. Maybe just a quick follow-up for for Simon. In your presentation, you talked about this this world in design that's changing where 20 nanometer, there's a lot more verification, a lot more software that's going into these types of, these types of chips Is there new opportunities for Arm to build fresh revenue streams on IP? Do you see any opportunities to get into the software business or adjacent areas where you're you can leverage that ecosystem you talk about, perhaps in verification or in software going forward? I mean, potentially, yes. I mean, we've looked at, an embedded software a few times over the history of ARM. But at the same time, we are we like the fact that we have a board ecosystem of partners that we're working with to do some of those things that we are not expert in. As I said, we We can't do everything here. We do some things really well, and there are some areas where we can leverage our historic strength in our business model, and repeat over again. There are some things that we choose not to do or choose not even to try and go and do, because they're already, a bunch of other players in our ecosystem and we're doing it quite well. So we're going to kind of carefully look at the opportunities around this. As you say, verification is a big problem. Our, historic approach there has been to work with EDA Companies who are really good at solving that sort of thing, and enable that for the ARM ecosystem. And I think for now, that's the approach that we would take there. Very long question. Sure. Thanks. It's Lee Simpson from Jefferies. Maybe a couple of quick ones for Pete, if I could. Peter, I wonder if you could maybe give us some, comps for Scrimier versus the next generation architecture coming out of a, of arrival who's talking about a baseline of a 100 gigaflops for for cord for cord in the next next 12 months. Maybe alongside that as well, we we're hearing increasingly about HSAs. AMD making a big noise about that back in February. I wonder what that does for, or how that sits alongside your philosophy of optimizing next the CPU and looking to make some clip there on the space size too. Okay. Then I'll be very quick. So I'm not going to give any details on the screen reader just now. We'll be doing a launch, on that specific product later on. So it's a nice roadmap blob. That's all we're going to talk about. Just you would expect it has a lot more performance. That's what's driving us there. On HSA, we like, the ideas that, AMD and the HSA consulting we're coming up with. We have talked to them, quite extensively and it's very interesting. And it's completely in line with our ideas as well. Okay. With that, I'm afraid it's 1 o'clock, and we have to terminate the session. So thank you all very much for coming along, and, we hope you enjoyed it.

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