ARM's chip licensing revenue and profit keep on rising

But royalty revenue from shipments of chips containing its designs has stalled as mobile operators sell off older phones

ARM Holdings' chip licensing business continues to grow, the company said, reporting year-on-year increases in second-quarter profit and revenue.

Revenue for the quarter totalled £187.1 million (US$309.6 million) for the quarter, up from £171.2 million a year earlier, according to International Financial Reporting Standards. Profit rose to £68 million from £15 million a year earlier.

During the quarter, the company signed 41 additional processor licenses, for applications including mobile computing, consumer electronics and embedded intelligent devices, taking the total number of licenses over 1,100.

The company does not manufacture or sell chips itself, making its money from licensing its processor core designs to other companies for inclusion in their chips, and from per-chip royalties for devices manufactured using its technology.

In the second quarter, around 2.7 billion chips containing ARM technology shipped worldwide, up 11 percent year on year, the company said. Growth was especially strong in the markets for enterprise networking hardware and microcontrollers, it said.

But although shipments were strong, royalty revenue was weak, falling behind that from licensing. Technology licensing revenue for the quarter rose 36 percent to £89.6 million, from £66.1 million a year earlier, while royalty revenue slipped to £80.3 million, down 9 percent from £88.1 million in the second quarter last year. The company blamed inventory management in parts of the electronics supply chain for the decline in royalties, particularly a move by mobile operators to sell off older 3G handsets before switching their subsidies to LTE handsets.

ARM expects royalty revenue to pick up in the second half of the year, though, as chip shipments increase and more customers adopt its most advanced technologies, which command higher royalty payments.

Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.

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