My students use ideas from my class to describe a business model for ARM, which is a successful provider of microprocessor cores for mobile phones. They describe the value proposition, customer selection, value capture, scope of activities, and method of strategic control for ARM's entry into the microprocessor market for PCs.

1. ARM’s Entry into PC Market
- A Business Model
MT5016: Business Models for Hi-Tech Products
Group Members:
Chen Liang (A0082053N)
Li Jianwen (A0077040N)
Wong Jian Wen, Desmond (A0082079Y)
Wu Ai Long (A0089182W)
Yen Jia Ting (A0082031X)

2. Agenda
 Introduction
 Customer Selection and Market
Segmentation
 Value Proposition
 Value Capture
 Scope of Activities
 Strategic Control

3. Introduction

4. ARM Embedded Processor
Main CPU Chip
(SoC)
ARM Embedded
Processor

5. Background
 ARM successful in current smartphone and tablet markets
(>95% Market Share)
 Still, multiple suppliers are designing ARM-based CPU for
other devices like servers
 Processing Power required for PC:
Smartphone (low) Server (high)
PC
Question: Can ARM leverage its PC entry on the
momentum generated in their already successful
Smartphone market??

6. Types of Personal Computers
Personal Computer PC
Stationary Mobile
Workstation Home
Theatre
Desktop
Laptop Netbook
Ultrabook Tablet
Higher Processing Performance

7. ARM’s Processor Performance Vs.
Different Market Needs
160
Server
140
PC
ARM High Perfromance
ARM
Overall Performance
Tablet
120
Mobile Phone
Requirement
100
80
ARM TechCon in Nov’2012 60
40
20
0
Time

8. PC Market is Diversifying

9. Existing PC Market
+ =
 Dominant partnership
between Intel and Microsoft
 Strong Brand Names
over the years

10. Existing PC Value Chain
Equipment Software/OS
Vendor Development
Design CPU CPU System PC
Service Design Manufacturing Level R&D Manufacturing
Processor
Core
Development

11. Intel in PC Value Chain
Equipment Software/OS
Vendor Development
Design CPU CPU System PC
Service Design Manufacturing Level R&D Manufacturing
Processor Core
Development

12. What is happening right now?
+ =
CPU OS
Time for ARM Happening
to Enter!
All
CPU Supporting
Embedding ARM
ARM
Processor

13. Customer Selection &
Market Segmentation

14. ARM in PC Value Chain
Equipment Software/OS
Vendor Development
Design CPU CPU System PC
Service Design Manufacturing Level R&D Manufacturing
Processor Core
Development
Vertical
Disintegration
:: ARM ONLY Microsoft
DEVELOPS Google
PROCESSOR
Apple
CORES
CPU Designers: AMD, Nvidia, Apple, Samsung, Qualcomm, Broadcom
OEMS: Dell, HP, Levono, Acer, Sony, Samsung
Semiconductor Foundries: TSMC, Globalfoundries, Samsung, UMC

15. Who are the possible customers?
Direct Customers
 CPU Designers
Indirect Customers
 OEMs (Dell, HP)
 End Users
Microsoft
Google
Strategic Partners Apple
 OS Vendors
 Manufacturing
Foundries
CPU Designers: AMD, Nvidia, Apple, Samsung, Qualcomm, Broadcom
OEMS: Dell, HP, Levono, Acer, Sony, Samsung
Semiconductor Foundries: TSMC, Globalfoundries, Samsung, UMC

16. Value Proposition

17. Strategy Canvas for PC OEMs
High
HP, IBM (Servers, Workstations)
Intel, AMD (Desktops)
ARM (Tablet, Laptops)
Low
Power Instruction Cost
Consumption Set (mips/$, area)
(mips/Watt)
Time Peripheral
Performance Design Application
(mips, GHz) To Scope
Market Complexity

18. Value Proposition for End-users
(PC Consumers)
Value Proposition
Lower Processor Cost = Lower costs to produce
PCs = Lower PC prices for consumers
High Medium
Performance
Cortex A50)
INTEL ARM

19. Value Proposition for End-users
(PC consumers)
Value Proposition
Lower Power = Longer Battery Life

20. Value Proposition
Semiconductor Foundry
•Opportunities for them to
CPU Designers cater to customers who want
•Simpler and Customizable Designs ARM-based PCs
• Easier instruction set •Effects of Vertical
• Shorter time to market Disintegration :: Economies
•Effects of Vertical Disintegration of scale in terms of
::Economies of scale in R&D Value Proposition manufacturing
Low Power
OEMs Lower Cost End Users- PC Consumers
•Power-efficient feature •Lower Purchase Price
•Wider Range of Selection
Shorter Time to •Lower Power consumption
•Effects of Vertical Market •Less Heat generated
Disintegration :: Lower •Longer Battery Time
system costs Customized Designs
Differentiation
Opportunities
OS Vendors
•Opportunity for them to Apps Developer
penetrate wider market by •Opportunity for them to
providing processor- enter PC markets by
compatibility to the OS installed providing processor-
•Synchronize OS across devices compatibility to the Apps
CPU Designers: AMD, Nvidia, Apple, Samsung, Qualcomm, Broadcom
OEMS: Dell, HP, Levono, Acer, Sony, Samsung
Semiconductor Foundries: TSMC, Globalfoundries, Samsung, UMC

21. Scope of Activities

22. Vertical Disintegration
Processor
CPU Design
O
Core Design Manufacturing
E
Value Proposition
M
 Lower Cost
 Longer Battery Life
 Short Time to Market
 Customized Design
 Product differentiation
 Opportunities to enter wider market

23. Vertical Disintegration
Processor
CPU Design
O
Core Design Manufacturing
E
M

24. Vertical Disintegration
Vertical Disintegration
• Architecture platforms by ARM
• Joint development with OS
providers
• Multiple logical and physical
designers
• Multiple manufacturers
• Value provided to Value Chain
 Unique ARM Architecture
 R&D resource Pooling
 Customized design
 Quick time to market
Longer Battery Life and Lower cost

25. Value Capture

26. How does ARM gets its revenue?
 Perform Research & Development
 Design Processors chips as per customers needs
 Sell design to Semi-Conductor Partner for license and
royalty fees
$
$

27. Strategic Control: How
should ARM protect and
sustain its Profitability?
Building an Ecosystem
Industrial Architecture
IP Management

28. Building an Eco-System
Components
Foundries
Partnership on
chip development
Operating System
Manufacture Chip
CPU Designers OEMs
Provide Provide CPU
Embedded
Process for CPU
Business Development

29. Building an Eco-System
High level of disintegration requires:
 Strong collaboration among stakeholders
 Business development with OEMs
 Strong partnership increases ARM
competitive advantage
ARM is successful only if
Partners are successful!

30. Industry Architecture
Currently, High level of control by Microsoft and Intel:
 Control interface between operating system, processor
and personal computers
However, with strong collaboration with OS partners:
 ARM can be successful
Microsoft – Value proposition of a power efficient
and low cost processor
Google – Leveraging on its Android partnership to
strengthen Chrome in the PC market
 Control interface can be changed

31. IP Management
ARM to have Strong IP management by:
 Protecting its existing core IP portfolio
 Creating IP in new domains
 Expanding IP portfolio by acquiring
smaller start-ups
 Retaining high-quality R&D staff

32. Summary
 Time is ripe for ARM to enter the PC
Processor market
 Attractive Value Proposition
Value Proposition
 Lower Cost
 Longer Battery Life
 Short Time to Market
 Customized Design
 Product differentiation
 Opportunities to enter wider market

33. Summary
 Participate in the Vertical Disintegration

34. Summary
 Become a Key Part of the Value Chain
Microsoft
Google
Apple

35. End