Beijing time on September 28 news, there is an interesting oddity in the modern technology world: there is a company that does not produce anything, but it dominates the chip world. Its technology is in your phone, your TV, your car, even your laptop, and the data centers that power it all.

It is ARM, the chip design company that has been through a lot in the past few years. ARM designs instruction sets for modern chips, and its customers include Qualcomm, Apple and Samsung, whose chips are based on ARM's architecture.

In terms of the business model, ARM licenses the instruction set to these companies and collects royalties from these companies. With ARM's architecture, these companies can produce a variety of custom chips to suit their needs. ARM's model has been a huge success.

Rene, CEO of ARM; Rene Haas sat down with the media on Tuesday to discuss the company's business model, business relationships with customers like Apple, a sale, an IPO and more.

ARM chips everywhere

"ARM is not a well-known company and we are not well known, but we think we are very important," Haas explains. First, ARM is in the semiconductor value chain of the semiconductor world. Basically, you can find ARM's technology in almost any type of semiconductor product and/or original Equipment manufacturer (OEM) product.

Our technology covers smartphones, laptops and smart TVS. Look around my desk and there are probably ARM processors everywhere. We're not actually producing anything. We design products. It's intellectual property.

Instead of making a chip, we design and license that design to the people who will make the final product. Our most famous major product is the microprocessor, or CPU, which is the brain of almost every electronic device.

Instead of making the chip, we license this brain to other people. As a result, ARM chips are everywhere. From last quarter's data, all semiconductor companies and original equipment manufacturers in the world manufactured and shipped 7.4 billion chips with ARM cpus, Gpus or other technologies built in.

This is a huge number. So we're in the semiconductor value chain, but we don't make anything. We do design, and most of it is microprocessors.

 Clients cover almost all large companies

'In the electronics industry, it's probably easier to say who's not our customer,' says Mr. Haas. Almost every company you can think of is our client. TSMC, Samsung, GF, these are the physical companies that produce chips.

Intel, AMD, Nvidia, Qualcomm, Amazon, Microsoft and Google are also our customers. Then, in the rest of the world, our customers have Alibaba, Tencent and Bytedance. Almost every company is our client.

Our business model has two components. We start with an upfront licensing fee, which is what our partners pay us to use the technology. This gives them the right to design using our technology.

If these designs end up in production and become the final product, we charge a per-unit royalty based on some mathematical calculations associated with the contract. So, we have two sources of revenue: one is license revenue and the other is royalty revenue.

Consumers buy devices that contain chips from Samsung, Qualcomm, and Apple, but consumers don't pay ARM, these companies pay. For example, Qualcomm reports to ARM how many chips they sell and then pays ARM based on a pre-agreed usage rate.

 neutral principle, the importance of ARM will try to be as neutral as possible, Haas said. As we all know, we are known as “ The Switzerland of electronics ” (Switzerland maintains a policy of neutrality), that's not a bad metaphor. We don't try to pick winners and get involved in sub-ecosystems within the ecosystem. If you start at the bottom of the semiconductor chain, you run into GF, Samsung, TSMC, Intel, all the people who make chips, and you have to work with all of them.
 We have to make sure our technology can be built on every semiconductor process in the world, and that requires investment from all of these partners. Then, when it comes to Android, Linux, Windows, and all the major operating systems we support, we have to make sure we're in there, too.

Many chip companies depend on TSMC, so how much does ARM depend on TSMC? 'We work closely with TSMC,' Mr. Haas said. All foundries are important to us and the company will remain neutral.

Why did you change your mind about going public?

 Before Haass became CEO of ARM, his predecessor was staunchly opposed to going public because of the pressure to increase revenue once the company went public, which would put ARM's neutral, fair model in jeopardy because it could strike special deals to boost revenue.
'Late last year, when the Nvidia deal essentially fell apart, we made a change and announced our decision to pursue a public offering,' Mr. Haas said in response. When I took over in mid-February and ARM's fiscal year ended in March, we were finally able to talk about our financial results, which we hadn't talked about in a while.

We were very quiet when Nvidia was looking for acquisitions. When we reported our revenue for the last fiscal year, we were well over $2 billion.

We have generated $2.6 billion in revenue, and we have never exceeded $2 billion in the past. Our operating margin is close to 40 percent, but people think we're losing money because we don't disclose more. This quarter, you'll find those numbers even higher than last year: operating margins of more than 50 percent, revenue of $700 million, and $450 million in royalties.

Haas has said it plans to launch in March 2023. As time approaches, will ARM be able to deliver on this goal? Haas said: "We are in the process now, I can't say too much.

Will ARM kill the x86 architecture?

When asked if ARM and RISC-V architectures will make the aging x86 architecture obsolete, Haas said it's hard to tell. x86 has been around for a long time and has a very large installed base. I certainly don't want to do anything to denigrate what they've done. I think the challenge with x86 is that it only comes from two companies (Intel and AMD). That in itself is a limiting factor, limiting how far it can go.