(BN) ARM Chips to Leap From Smartphones to Networks That Run Them (3)

Bloomberg News, sent from my iPhone.

ARM Chips to Leap From Smartphones to Networks That Run Them (3)

March 1 (Bloomberg) -- ARM Holdings Plc, whose chip designs are used in most smartphones, is set to power the networks that run them as it steps up competition with Intel Corp. in a $9 billion market.

With ARM already working with Hewlett-Packard Co. to bring out chips for computer servers, the same processor will also be directed at the base stations and wireless network equipment, Mike Inglis, head of the processor unit, said in an interview.

"It will be the networks with the ARM architecture," Inglis said at the Mobile World Congress in Barcelona. "It is the computer farm behind the mobile network."

ARM's low-power semiconductor blueprints are increasingly found in larger devices including tablets and other mobile computers as the company competes with Intel, the world's largest semiconductor maker. ARM aims to use its faster processor in the servers, the machines running websites and corporate networks, to help companies rein in energy costs.

"It is another obvious opportunity for them to move into a market which is right now based on Intel," said Vijay Anand, an analyst at Espirito Santo. "ARM's chips are low-power but they have been trying to improve their performance."

At the Barcelona event, LSI Corp. signed a licensing agreement to use ARM's faster processor in mobile broadband networks, while Texas Instruments Inc. is using the ARM blueprint to build chips for base-station infrastructure.

By 2017

"We need to bring it into the network," ARM Chief Executive Officer Warren East said in Barcelona today. "ARM can reduce power consumption of base stations by as much as 70 percent."

The companies may start producing chips in about a year and a half with shipments beginning from a range of 2014 to 2017, Inglis said.

"A lot of the chips for base stations are very specialized and ARM's designs would be fit only for limited applications inside a base station," said Pierre Ferragu, an analyst at Sanford C Bernstein. "It's not something you can compare with their smartphone presence."

ARM, which powers Apple Inc.'s iPhone, has benefitted from soaring demand for the chips used in smartphones as data traffic surges on the mobile networks. The Cambridge, England-based company is also moving into the personal computer market with the release of Microsoft Corp's next Windows operating system that will run on ARM chips for the first time.

'Barrier'

In the same way, ARM will require the software for servers to be developed before chips can be shipped, according to Nick Hyslop, an analyst at RBC Capital Markets.

"The software will be the barrier for the next three years," he said. About 40 percent of global spending on semiconductors is in the computing market including PCs and servers, Hyslop said. "And ARM's not yet in it."

ARM dropped 1.5 percent to 561 pence in London. The stock has declined 5.9 percent in 12 months.

The market for server processors was worth about $9 billion in 2011, according Framingham, Massachusetts-based researcher IDC.

To contact the reporter on this story: Jonathan Browning in Barcelona at jbrowning9@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/

Eugene.