Sluggish IoT uptake takes blame for Arm's slack software

Global Market for Internet of Things (IoT) Sensors in Healthcare
Arm isn't producing much revenue for software to support IoT. (BCC Research)

SoftBank Group spent $32 billion on Arm in 2016, but Arm’s software sales only hit $191 million last year, far short of expectations.

The slow performance has been blamed primarily on sluggish adoption of Internet of Things (IoT) technology, according to a report by the Wall Street Journal.

Arm is based in England and designs processors for smartphones, but also designs and sells software to manage connected devices for IoT. Those software sales have been flat for several years, even though the company had wanted to hit $2 billion in sales by 2025.

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In addition, Arm faces competition from Siemens and Amazon, among other giant players with better brand recognition, the report noted.

In some ways, Arm isn’t that different from many other early IoT vendors who have seen difficulty in earning profits from IoT projects.

“IoT was overhyped, but what isn’t these days?”Jack Gold, an analyst at J. Gold Associates, said via email to FierceElectronics. “You can’t simply create a market that people aren’t willing to pay for if they don’t see the benefits from buying products.”

Plus, many early IoT devices “weren’t all that good,” Gold said.

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A more foundational problem is that much of the IoT marketplace is at the low end where the Micro Processing Unit (MPU) dominates and where Arm has a small share, Gold added. “I’m not sure anyone in the chip business really makes money in IoT at this point, given that MPUs are in the tens of cents to $1 or so,” he said.

“However, as we see more higher end IoT needs like smart appliances, personal care devices and particularly security devices and medical devices where the premium for a more secure ecosystem and more compute that Arm provides, the investment starts to make sense,” Gold added.

Growth in smart cities technology should help Arm, as will personal appliances, he suggested.

“Give it another two to three years, particularly as 5G comes on board with low bandwidth IoT connections at reasonable prices, and you’ll see a lot more Arm chip take-up in IoT.”

Although there may be critics of Arm’s position in IoT, SoftBank Chief Operating Officer Marcelo Claure told the WSJ that Softbank is “bullish on Arm’s long-term prospects and IoT strategy and confident in the company’s ability to execute.”


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