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Chips are up for cheap smartphones, ARM CEO says

Simon Segars, chief executive of British chip designer ARM Holdings, sees room for growth with both cheap smartphones and cutting-edge server technology.

TAIPEI -- While global smartphone demand is growing more slowly, the rise of low-cost smartphones benefits both consumers and chip designer ARM Holdings, its chief executive argues.

Simon Segars expressed confidence on Tuesday that the British company can continue to thrive even though demand for premium handsets is softening as consumers in faster-growing emerging markets opt for entry-level and midrange devices. ARM dominates the chip market for mobile computing.

"Far from having peaked, there is still a lot of growth," Segars told the Nikkei Asian Review at Computex, Taiwan's largest annual technology expo. Total global smartphone users are expected to increase from 1.6 billion to more than 2 billion by 2020, he said, citing market research firm Gartner.

"The entire technology industry would be very happy if everyone on the planet bought a $700 smartphone, but it's not going to happen," Segars said. "Having people with voice-only phones upgrade to a $30 smartphone is very good for our business." Segars picked out Africa, India, South America and Southeast Asia as good potential growth markets for the innovative British company.

"In many developing countries, having access to smartphones has a very positive impact on the economy -- in the long term that's very good for our business," he said. "I have no issues with low-cost smartphones being sold. It is phenomenally good that this technology is becoming available in price ranges that almost everyone can afford."

Segars, 48, took the helm in 2013 and has led ARM to record sales every year since. He celebrates his 25th anniversary with the company this year. With fewer than 4,000 employees in 2015, it generated revenue of nearly $1.5 billion, for year-on-year growth of 15%, with profit increasing 31% to $608 million.

Data center push

ARM also has its eye on data centers to drive growth. Segars confirmed that Qualcomm of the U.S., the world's largest mobile chip supplier, and HiSilicon Technologies, the chip design arm of China's Huawei, are both working with ARM on the next generation of data center chips. He said ARM's other partners include AMD and Cavium, both of the U.S., and Bermuda-based Marvell Technology Group.

ARM wants to secure 25% of the global market in server chips by 2020. While 95% of smartphones worldwide employ its chip design architecture, the British company has less than 1% of the data center server chip market -- a field dominated by Intel of the U.S.

The fast-growing data center market is essential to the development of cloud computing and artificial intelligence. ARM has been working with Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, to challenge Intel.

Mark Liu, TSMC's co-chief executive, said last week that his company will be the first to produce advanced 7-nanometer chips for the next generation of data centers. Cliff Hou, vice president of research and development, said on Tuesday that 7nm chips provide an opportunity for ARM and TSMC to penetrate the data center market.

Segars said ARM's move into data center chips will create choices other than Intel for efficient processors used by large internet companies like Google, Amazon, Facebook and Alibaba Group Holding.

"The market is growing for sure," Segars said. "I think everyone who deploys a large chunk of servers is looking into ways to achieve greater efficiencies."

HiSilicon, Huawei's chip design division, is thinking along these lines. "Huawei's servers are still embedded with Intel's core processors with the x86 design, but we look forward to seeing a good new ecosystem emerge," a HiSilicon executive told the Nikkei Asian Review. "We think chips for data centers are definitely a sector HiSilicon would give a try."

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