Computing

Arm: 25 years as Britain’s most innovative company

By Oliver Smith 27 November 2015
Arm's chief technology officer (CTO) and member of the original founding team, Mike Muller.
Summary

The slow and steady rise of one small Cambridge-based company which has become Britain's biggest tech export.

For a global tech business which designs the computer chips used in nearly every smartphone on the planet, Arm Holdings is nothing like you would expect.

Forget free lunches, a colourful campus and bean bags, Arm is far more… British, about its success.

And what a success it has enjoyed. The UK business designs the chips which power over 95% of the world’s 6.1 billion smartphones.

Today, Arm sits as Britain’s largest, most successful technology firm and the 32nd biggest business on the London Stock Exchange, valued at over £15.8 billion.

But it wasn’t always like this, for the majority of its 25-year life Arm has been the outsider, a geeky Cambridge-based business staffed by a small team of engineers.

The little-known chip designer was originally spun out of Acorn Computers — makers of the early PCs you may remember from schools and universities in the 1980s and 90s — only to languish in obscurity for most of the 90s and early 2000s.

As Claire Ruskin CEO of Cambridge Network said yesterday, today there are more Arm-based chips than there are actual human arms in the world.

On Arm’s 25th anniversary, The Memo spoke to Mike Muller, Arm’s chief technology officer and one of the original 12-person founding team, to find out about the future of Britain’s best kept secret.

Startup life

Far from the lavish life that some tech businesses enjoy, Arm’s early days in 1990 were frugal.

“We were a startup, living hand to mouth, quite early on there were pay freezes because we were literally running out of cash,” says Muller remembering those early days.

For the first few years the success of Arm, recently spun off from its parent company Acorn, looked uncertain even to those working at the company.

Muller, who had until then been part of Arm’s engineering design team, quickly became the first head of marketing despite having no formal training.

“We could either hire sales experts who know nothing about the business, Arm or the technology, or some of us had to become more commercial.”

The move was a success and in 1992 Arm made its first commercial deal to licence its chip design to GEC Plessey Semiconductors, saving the business from what could have been a very short-lived life.

“It brought in money… and we just managed to avoid the spending all of the £1.5m we’d started with,” says Muller.

In the early years the thing that made Arm unique, and dismissed by many in the computer industry, was its new business model of selling the licences for chip designs to other companies who would actually manufacture them.

“There was really no intellectual property industry at the time, people just didn’t licence technology in the semiconductor world,” explains Muller.

“We were this small Cambridge company selling licences to big chip makers, many of whom had their own in-house designs as well.”

“Most people didn’t take us very seriously, there was an industry understanding that real men made their own processors.”

But Arm’s chips did gain traction in niche markets and, as well as licensing payments, the company began collecting royalties on each chip sold by its manufacturing partners.

Arm's first office, a converted 18th century barn just outside of Cambridge.

Printing mobile money

In the late 90s and early 2000s the big story in tech was the personal computer (PC).

It was the focal point for innovation and was seen as the future with Microsoft dominating PC software, companies like Dell producing hardware at ever lower prices and chip manufacturing giant Intel dominating the processor market.

At the time Arm had no skin in the PC game. While Intel focussed on big, expensive, powerful chips, Arm instead chugged away with its unusual strategy of designing low-powered processors that weren’t suited to be used to power PCs.

“It wasn’t a particularly interesting story and what we were doing wasn’t easy to explain,” says Muller, adding that Arm back then got little press or attention.

That began to change when mobile phones started growing in popularity, suddenly Arm’s low-powered chips could shine in these battery-constrained devices.

“A chip design we created in 1993… eventually led to silicon that was launched in the Nokia 6110 which became a big seller.”

Suddenly Nokia was the biggest mobile phone maker in the world, and used Arm chips, so other manufacturers began to use Arm as the safe choice for their phones.

“By the time mobile had become a significant market, we already had a strong foothold,” explains Muller.

The iPhone moment

While Apple’s iPhone in 2007 was a huge moment heralding the real birth of the modern smartphone market, for Arm (whose chip designs were used for the iPhone) it was merely an endorsement of their strategy.

“There wasn’t a sudden revelation around the smartphone, for us at the time it was a steady development curve and then people really found a way to use what we were making,” says Muller.

What did really change after the iPhone was Arm’s royalties it collected from every chip sold skyrocketed. Suddenly Arm became one of Britain’s most profitable companies and its share price, which had hovered around £1 for a decade on the stock exchange, saw a more than tenfold increase over the following years.

But for those inside Arm there was no big celebration when this was happening says Muller.

“For me personally my feeling was, yes this is great, but who knows when it will start coming down. The stock market goes through phases of being fixated on tech, lets just get on with delivering what we need to deliver.”

Future gazing

Looking ahead today Arm, led by CEO Simon Segars, isn’t resting on its laurels.

The company is fixated on designing the next low-power, efficient chips to be used in the ‘next big thing’ whatever that might be.

Today Segars, Muller and the rest of the team often talk about growing Arm’s market share in the Internet of Things, those internet-connected devices and appliances from fridges to thermostats that are slowly entering our homes.

But for Muller 25 years later while the technology and battles have changed, from the PC wars of the 90s to the fight between smartphone makers today, the ethos of Arm as a small, geeky outsider has always remained the same.

“That’s the thing that makes us so different from our FTSE 100 peers. Below us is Tesco with 500,000 employees and above us is a business with 30,000 employees, we’ve only got about 3,500 staff.”

“When it was just 12 of us it was all about the team and the people, and that’s still the same today.”

“That culture of a small group taking on the world is still here.”