Perspective: The unheralded monopoly

Imagine a company that controls more than 80 percent of its segment of the cell phone market and has 40 percent of the digital camera market. Now it wants to expand its reach in consumer electronics. Many would consider it predatory--even a monopolist.

Somehow, though, Cambridge, England-based ARM just doesn't give people the willies the same way behemoths like Microsoft or Intel do. You'd be hard pressed to find anyone spouting "ARM is evil! EVIL!!!" in a chat room.

The chip designer, though, is fairly pervasive. Now that Sony Ericsson has adopted ARM chips for its phones, more than 80 percent of the wireless handsets on the market run on processors based on ARM designs, said Mike Inglis, the company's executive vice president of marketing.

Chips based on the ARM designs have been incorporated into high-definition televisions by four of the five largest digital TV manufacturers. They're being used by several network equipment makers, camera makers and others, and Apple Computer has put them in its iPod.

"Seven hundred-and-eighty million ARM processors were shipped on the planet last year," Inglis said. In Japan, someone came up with a toilet with an integrated ARM-powered MP3 player, while someone else has designed a fireman's glove with a built-in ARM-based walkie-talkie.

A new ARM processor design, code-named Tiger, is expected to come out in silicon in 2006. It should raise handset speeds to 1GHz--well past the speeds available today.

ARM doesn't make the chips--it licenses the designs to Texas Instruments, Intel and other companies, which pay ARM licensing fees and royalties. Despite getting whacked by the chip industry downturn, ARM's revenue and profits are climbing again.

Recently, the company has begun to expand, Intel-like, and colonize components that connect to its processors. It has designed a signal processor that will help compress or decompress data such as video files: The first customer announcement will be made in a few weeks. In addition, ARM-designed graphics chips are set to appear in phones in about a year.

Like Intel, the company has begun to design building blocks--here, for handsets--and license the entire package as a platform to customers.

"It takes six months off the engineering" for smaller companies, Inglis said. "The gorillas who are fighting for the high end will always use their own thing," he added.

First, of course, the company is British, which tends to give their actions a genteel gloss. Accents--we love 'em.

As does Intel, the company is shouldering more of the software development work for its customers. It has invested in SuperScape, a Los Angeles company that creates cell phone games, and is performing the legal legwork so that handset makers can incorporate the software easily.

Recent initiatives with Texas Instruments and National Semiconductor have lead to phone technology for, respectively, better security and power management.

ARM's benign reputation stems from a number of factors. First, of course, the company is British, which tends to give their actions a genteel gloss. Accents--we love 'em.

Second, England is a perennial underdog in the IT world. Even though it is home to world-class research universities, few major computing companies have emerged from that green and glorious isle.

While several explanations are offered, one of the more commonly heard is that the country simply doesn't have the same university-to-stock market system as the United States. The company Nanomagnetics, which is developing a memory medium out of organic particles, came out of the University of Bristol, but "it was not set up to do commercial spinouts," CEO Eric Mayes said. An American, Mayes is now trying to raise venture funds and admits that in England, it's not as easy.

The company's business revolves around developing intellectual property for other--mostly larger--companies.

Finally, and most importantly, ARM has to be nice. The company's business revolves around developing intellectual property for other--mostly larger--companies. There are only two ways to make it as an IP company: bend over backwards to accommodate your customers and potential clients, or sue the pants off of them for patent infringement.

ARM has taken route 1. As a result, the company functions almost like a Swiss bank, providing technical assistance and engineering to avowed enemies.

Because its customers are found worldwide, the company almost has as many international offices as employees, ARM Chairman Sir Robin Saxby has noted. (The knighthood, a 2002 honor, came with a one-day parking pass at Buckingham Palace.)

Tweaking deals is a house specialty. "In any licensing deal, there are about 70 variables you can pull," Inglis said.

It is that sort of customer service that will allow the mini-monopolist to run unimpeded. In fact, you can see the attitude being adopted by others. Competition from Linux and a plethora of security problems have prompted Microsoft to focus more on customer satisfaction. Google is facing a growing number of critics and skeptics for its somewhat elitist image.

In a way, ARM is helping to make strong-arming unfashionable.

Biography
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas. He has worked as an attorney, travel writer and sidewalk hawker for a time share resort, among other occupations.

More Perspectives

Market Share doesn't make a monopoly

I find it extremely unlikely that ARM will ever be considered a monopolist in the same category as Microsoft. Monopolies are not defined by what percentage market share they have. They are defined by their ability to dictate prices. The most damning piece of evidence against Microsoft was something that was barely mentioned in court - That fact that during a period when every component that went into the PC (from the chassis to the processor) dropped dramatically in price, the cost of the operating system remained steady. PC companies were able to squeeze deals out of everyone in their supply chane except Microsoft.
Despite its growing market share, ARM will never be able to dictate prices in this manner. Competitiong from other standards and between its licensees will prevent it. The fact that ARM goes to the trouble and expense to "bend over backwards to accomodate customers and potential clients" shows the true nature of its position. ARM needs to do this in order to spread its standard. A true monopolist could tell its customers to take it or leave it and then keep the support money for its shareholders.

Narcissism

John Doe is exactly correct. Gates acts, not his unique situation,
makes the difference. Destructive monopolists are a breed which
sieze unbridled power, coupled with narcissism. This narcissism
spews forth self serving actions under a self riteous sense of
entitllement. They are "entitled" to the "fruits" of their
situation, something that is time limited under our concepts of
patents and copyright law. Monopolists extend
their ownership in time and thus breadth.

[nzamparello]

Already Done!

Hhehehe! Already I can tell that the journalist did NOT do his homework! ARM did make an entry into the consumer market... Remember the 3DO game system.. You know the very first 32-bit, cd-based game system with mpeg video playback!?!? That was powered by a 25 MHz arm-100 processor! HELLO!!! That's what got arm on the map in the first place!

[Prndll]

What's the problem?

C'mon CNET! The general publics opinion of "evil" refers to the way a company uses it's power. Having the power is a completely differant thing.

example: each person has the ability to kill, the evil is in the act of killing.