Page 2: The ARM business model
Technology spreads quickly in the global economy and goods can be made in low-cost countries before being shipped to developed markets. Companies make themselves unique by being at the forefront of technology and developing products that others find hard to imitate. The source of this competitive advantage is ‘knowledge’. Today, more than ever, we live in a knowledge-based economy where the capabilities of businesses determine success. This can relate to the concepts they develop, how entrepreneurial they are, how ideas are used and the strengths of partnerships they make.
ARM is built upon developing intellectual property. This is the use of scientific research and development, combined with ideas and a deep-rooted understanding of the market, to create unique and highly-sophisticated designs for innovative digital products. Nowhere is the use of intellectual property more apparent than in the area of semiconductors. The evolution in intellectual property is driving innovation across a range of consumer and business applications pushing the use of semiconductors to new limits. As well as its own research, ARM has a partnering business model, with joint research and development programmes with universities, companies and other organisations. From these activities it draws its income from three sources:
- Licensing - authorising others to use the technologies developed, from which a fee is drawn.
- Fees - based upon each chip manufactured by licensed companies.
- Sale of Supporting Technology and Development Systems - used by designers in the development of new products.