British Chip Designer Arm Eyes Lucrative Automotive Market

British semiconductor and software design company Softbank Group Corp SFTBF SFTBY Arm has doubled revenue in its automotive business since 2020 in its quest for new avenues for growth ahead of a widely speculated public listing.

Dennis Laudick, Arm vice president, said the pace of the segment's growth to power everything from electrification to advanced driver assistance systems (ADAS) and in-vehicle "infotainment" outpaced other divisions like smartphones and data centers, Financial Times reports.

Modern cars require a more significant amount of chips and will likely suffer from severe shortages this year due to strong demand.

Arm's total revenues grew 35% in 2022 to £2.7 billion. Arm's revenue from its automotive business increased fivefold over the past four years.

Arm won 85% of the global market for in-vehicle "infotainment" and 55% in ADAS, Laudick told FT. All of the top 15 automotive chipmakers, including Nvidia Corp NVDA, STMicroelectronics N.V. STM, and Renesas Electronics Corp RNECY, use designs licensed by Arm.

The average value of semiconductors per car will likely rise from $700 in 2020 to $1,138 by 2028, according to S&P Global Mobility.

Arm has rapidly increased its investment in software engineering. In 2016, Arm invested around 75% of its engineering resources in hardware, with 25% in software. Today, it says the split is 50:50. 

Arm increasingly gave automotive chipmakers like STMicroelectronics and Nvidia the ability to play around with different types of designs before they buy a license.

However, Mobileye Global Inc MBLY founder Amnon Shashua preferred multiple vendors. Shashua said if Mobileye had been entirely reliant on Arm, the chip designer had been successfully sold to rival chipmaker Nvidia for $66 billion last year, it "would have been a disaster."

Jay Goldberg, an analyst at D2D Advisory, told FT, "The automotive market is crucially important, and no one has won that yet."

The most advanced autonomous cars will likely come to market at the decade's end.  

Price Action: SFTBY shares traded at $44.12 in the premarket on the last check Tuesday.