What’s inside the chips inside the iPhone?

by Jeff Dorsch, August 29th, 2007, 6:51 am

Now that the excitement and hype over the Apple iPhone have died down, let’s look at one of the big winners among the component suppliers for the new smart phone: ARM Holdings.

ARM is an interesting case. It’s not just a fabless semiconductor company (a term used to describe chip companies that don’t have their own manufacturing plants, or wafer fabrication facilities, as they’re called in the industry) — you could call it a product-less semiconductor company. ARM doesn’t sell products; it licenses semiconductor intellectual property (or SIP) designs to other chip companies. Those chip companies then incorporate the ARM designs (known as SIP cores) into their semiconductors. SIP cores are building blocks for creating chips. Semiconductor companies can choose cores for a variety of chip functions from dozens of developers.

ARM is the biggest SIP company in the world, well ahead of leading competitors MIPS Technologies and Rambus. While the SIP market is growing rapidly — Gartner has forecast it will rise from $1.8B in 2006 to more than $2.7B in 2010 — profits in the SIP business have been elusive for many companies. ARM is consistently profitable, in comparison.

Back to the iPhone — product teardowns have shown there are three or four chips in the Apple product that incorporate the ARM architecture, including the main processor made by Samsung Electronics and the baseband processor supplied by Infineon Technologies. The more iPhones sold, the more licensing revenue and royalties due to ARM. The company isn’t counting only on the iPhone to sell, however. ARM licenses its cores for chips that go into digital still cameras, digital TVs, set-top boxes, and video game consoles, among other products. Those products are made by many well-known manufacturers of consumer electronics, such as Canon, Eastman Kodak, Hewlett-Packard, LG Electronics, Microsoft, Panasonic, Samsung, Sony, and Toshiba.