With ARM chips in an estimated 77% of the embedded RISC processor market, it has become the de facto global industry standard. How the company went about establishing its technology as standard across so many products and geographies is the subject of this Case Study by Eleanor OKeeffe, Research Fellow, and Peter Williamson, Professor of International Management and Asian Business.
ARM (Advanced RISC Machines) began as an offshoot of UK computer company Acorn, which had been the dominant PC brand in Britain in 1985. After Acorn began losing ground to US rivals, company management saw the potential of its chips, which were designed to meet specifications for low cost, small size and low power usage, while also avoiding the need for expensive support chips that were typically used in parallel to optimize performance.
RISC chips are microprocessors that permit computer hardware to interpret and execute software demands, acting as the boiler room for a wide range of portable devices like calculators, car navigation systems and mobile phones, as well as personal computers and more complex hardware. Without the deep pockets to build its own manufacturing facility, ARM decided to focus on IP in other ways. It began by licensing its chip designs to semiconductor companies, who would take the ARM enabling technology, add in their own application-specific technology, and use their wafer fabrication plants to manufacture the chips. These would then be sold to Original Equipment Manufacturers (OEMs) like Nokia or HP and end up in a range of consumer and industrial products, from mobile phone to printers.
These licensing partnerships not only provided a source of income for ARM, but access to knowledge. Every time ARM granted a license it tried to build a reciprocal relationship that would give ARM insights into the partners process technology roadmap and access to new knowledge about emerging technologies. This gave it an advantage in creating designs that anticipate the future needs of its customers.
ARMs decision not to create custom designs for individual customers is a second strategy that has set it apart. By coming up with a single design for each type of application, such as wireless communications or imaging, ARM moved toward positioning its chips to become a global standard. ARM had to understand the technologies and the needs of different semiconductor manufacturers and OEMs, then find the right trade-off between their competing priorities to come up with a design that would suit the most important requirements. But since this knowledge was scattered around the world, it needed to rapidly build a global network capable of accessing and mobilising knowledge.
To pull this off, ARM has embedded itself into the development process, opening offices in key technology hotspots around the world and creating numerous partnerships. (By 2001, it had more than 50 semiconductor partners as well as partnerships with design companies, operating system developers, and application software companies.) As ARMs business model has developed, four main characteristics have emerged:
- Fishing for new knowledge having radar for new technologies and knowing where to look
- Encouraging entrepreneurial projects incorporating entrepreneurship into the ARM culture
- Oiling the wheels of internal communication putting engineers in contact with customers as well as employees in contact with one another
- Building and managing the right sort of partnerships assigning partner managers to care for each licensee
The result has been a new kind of metanational company that sees the world as a global canvas dotted with knowledge, rather than as a set of national markets. The authors conclude the Case by asking where this kind of company will go next and where are its limits?