WEBVTT - Arm CEO Rene Haas Talks AI And Semiconductor Growth

0:00:02.360 --> 0:00:06.680
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:06.920 --> 0:00:09.119
<v Speaker 2>Moving on to ARM, which has come from what was

0:00:09.160 --> 0:00:12.160
<v Speaker 2>in the red pre market training to a higher three

0:00:12.160 --> 0:00:12.920
<v Speaker 2>and a half percent.

0:00:13.000 --> 0:00:14.520
<v Speaker 3>Now this is they too.

0:00:14.400 --> 0:00:16.239
<v Speaker 2>Really managed to beat out the gate when it comes

0:00:16.280 --> 0:00:18.439
<v Speaker 2>to the both the top and bottom line.

0:00:18.520 --> 0:00:20.520
<v Speaker 3>The company's revenue forecast was a bit of.

0:00:20.520 --> 0:00:22.279
<v Speaker 2>A concern nine hundred and twenty million to nine hundred

0:00:22.280 --> 0:00:23.640
<v Speaker 2>and seventy million, which.

0:00:23.400 --> 0:00:25.680
<v Speaker 3>Perhaps just fell short of some expectations.

0:00:25.880 --> 0:00:28.040
<v Speaker 2>But they really are maintaining their annual forecast of three

0:00:28.080 --> 0:00:30.240
<v Speaker 2>point eight to four point one billion dollars in sales.

0:00:30.720 --> 0:00:32.800
<v Speaker 3>So let's get into it all a little bit more ed.

0:00:33.520 --> 0:00:35.120
<v Speaker 1>Yeah, I think the shares are so interesting.

0:00:35.120 --> 0:00:37.159
<v Speaker 4>For maybe it's a company reporting November fifth, and it

0:00:37.200 --> 0:00:39.440
<v Speaker 4>took time for the market to wake up and read

0:00:39.440 --> 0:00:40.279
<v Speaker 4>the numbers a little bit.

0:00:40.280 --> 0:00:43.640
<v Speaker 1>Who knows. The chip maker did give what was seen as.

0:00:43.520 --> 0:00:47.000
<v Speaker 4>A sluggish sales outlook and at first disappointed investors. What

0:00:47.040 --> 0:00:49.839
<v Speaker 4>has changed. Rene Huss is the CEO of ARM and

0:00:49.880 --> 0:00:52.600
<v Speaker 4>joins US. Now it's really interesting right in the function

0:00:52.640 --> 0:00:57.000
<v Speaker 4>of what ARM does on licensing royalties, because sometimes it's

0:00:57.000 --> 0:01:00.160
<v Speaker 4>not about unit growth. I look at like revenue for example. Well,

0:01:00.240 --> 0:01:03.640
<v Speaker 4>maybe some evidence renee that the Chinese consumer in particular

0:01:03.680 --> 0:01:05.240
<v Speaker 4>is buying higher end handsets.

0:01:05.480 --> 0:01:06.880
<v Speaker 1>How does that help you benefit?

0:01:08.680 --> 0:01:11.520
<v Speaker 5>Well, good morning Ed and Caroline, and we are very

0:01:11.520 --> 0:01:14.119
<v Speaker 5>happy about the quarter we just reported. Exceeded the high

0:01:14.200 --> 0:01:17.240
<v Speaker 5>end of the guidance and our royalties were at a

0:01:17.280 --> 0:01:20.400
<v Speaker 5>record number. And to your question, you know, one of

0:01:20.440 --> 0:01:22.280
<v Speaker 5>the things that we have seen a huge benefit from

0:01:22.440 --> 0:01:25.160
<v Speaker 5>with our technology going forward has been our Version nine,

0:01:25.560 --> 0:01:27.720
<v Speaker 5>which commands a much higher royalty rate than we have

0:01:27.800 --> 0:01:29.800
<v Speaker 5>in the past. And what that allows us to do

0:01:30.200 --> 0:01:33.240
<v Speaker 5>is not exactly track the market from a unit standpoint.

0:01:33.720 --> 0:01:36.960
<v Speaker 5>One of the proof points of that unit sales for smartphones.

0:01:37.000 --> 0:01:39.880
<v Speaker 5>We're up four percent in the last quarter. Our royalties

0:01:39.880 --> 0:01:42.959
<v Speaker 5>were up forty percent, so you can get a sense

0:01:43.000 --> 0:01:44.800
<v Speaker 5>that you're seeing a very big difference. So that's really

0:01:44.880 --> 0:01:47.920
<v Speaker 5>driven by two factors. One is Version nine, as I said,

0:01:47.920 --> 0:01:50.760
<v Speaker 5>which commands a high royalty rate. And second, we're just

0:01:50.800 --> 0:01:55.520
<v Speaker 5>seeing more armed technology inside these smartphones, particularly the premium segment,

0:01:55.800 --> 0:01:59.000
<v Speaker 5>which also commands a high royalty rene.

0:01:59.040 --> 0:02:00.800
<v Speaker 4>A lot of investors, people that I speak to in

0:02:00.800 --> 0:02:03.800
<v Speaker 4>the world of technology think you're great. You're a great CEO,

0:02:04.480 --> 0:02:06.880
<v Speaker 4>and you've been embarked on this sort of journey for

0:02:06.960 --> 0:02:10.560
<v Speaker 4>profit and margin. But is there a ceiling to that, Like,

0:02:10.639 --> 0:02:13.560
<v Speaker 4>at some point, how do you keep driving those levels?

0:02:13.600 --> 0:02:16.200
<v Speaker 4>Are you sort of very pricing dependent at this point?

0:02:17.800 --> 0:02:20.079
<v Speaker 5>I don't think so. You know, the market that we're

0:02:20.080 --> 0:02:23.720
<v Speaker 5>addressing is very, very large, and one of the things

0:02:23.720 --> 0:02:26.680
<v Speaker 5>that has made it even larger has been all things AI.

0:02:26.919 --> 0:02:29.239
<v Speaker 5>And if you think about what ARM does we do compute,

0:02:29.280 --> 0:02:32.600
<v Speaker 5>we do the CPU. Every digital device has one, and

0:02:32.639 --> 0:02:35.400
<v Speaker 5>the fact that you're running all these AI workloads on

0:02:35.480 --> 0:02:38.359
<v Speaker 5>devices that are already running different applications that they had

0:02:38.360 --> 0:02:40.640
<v Speaker 5>to in the past, that drives a need for more

0:02:40.639 --> 0:02:43.400
<v Speaker 5>and more compute capacity, which ends up ending up with ARM.

0:02:43.919 --> 0:02:46.760
<v Speaker 5>So as a result, we were very very fortunate to

0:02:46.840 --> 0:02:50.360
<v Speaker 5>have some tailwinds from a technology standpoint driving our growth.

0:02:50.600 --> 0:02:52.280
<v Speaker 5>So as far as the ceiling, I don't think about

0:02:52.280 --> 0:02:54.600
<v Speaker 5>it quite that way, But I do think where we

0:02:54.639 --> 0:02:57.600
<v Speaker 5>are is a market where we just can't get enough

0:02:57.600 --> 0:02:59.720
<v Speaker 5>compute capacity for all these workloads that are going to

0:02:59.720 --> 0:03:03.160
<v Speaker 5>be run on every device in your home or your business.

0:03:03.840 --> 0:03:06.920
<v Speaker 2>Meanwhile, though perhaps some of the tension around compute and

0:03:07.040 --> 0:03:09.880
<v Speaker 2>AI has been whether China is going to quote unquote

0:03:09.880 --> 0:03:12.240
<v Speaker 2>beat out the United States and that suddenly comes into

0:03:12.800 --> 0:03:16.040
<v Speaker 2>a closer focus, particularly with the results of the US election.

0:03:16.320 --> 0:03:18.560
<v Speaker 2>Does any of that concern you, particularly around the trade

0:03:18.560 --> 0:03:22.200
<v Speaker 2>and embroilment and whether that curtails the industry and going forward.

0:03:23.400 --> 0:03:25.880
<v Speaker 5>Yeah, a little hard to say, Caroline, relative to what

0:03:26.720 --> 0:03:29.760
<v Speaker 5>could happen from perspective of tariffs, etc. Etc. I think

0:03:29.760 --> 0:03:33.720
<v Speaker 5>the one thing that I'm happy about post the election

0:03:33.760 --> 0:03:35.760
<v Speaker 5>on Tuesday is that here we are on Thursday morning

0:03:36.240 --> 0:03:39.600
<v Speaker 5>and we have a result. We're not debating about what

0:03:39.680 --> 0:03:42.080
<v Speaker 5>might happen or could happen or should happen. We at

0:03:42.160 --> 0:03:45.080
<v Speaker 5>least have a result behind us, which is good for business,

0:03:45.080 --> 0:03:47.800
<v Speaker 5>it's good for the country. Now going forward, we'll just

0:03:47.840 --> 0:03:51.360
<v Speaker 5>have to see what goes forward. In terms of the

0:03:51.400 --> 0:03:54.080
<v Speaker 5>things you mentioned, the China business for US has been

0:03:54.320 --> 0:03:57.840
<v Speaker 5>very resilient and very strong, both in data center and

0:03:57.880 --> 0:04:00.760
<v Speaker 5>phones that we've talked about, but also in the oomobile sector.

0:04:00.840 --> 0:04:03.240
<v Speaker 5>So regarding your question, we'll just have to wait and see.

0:04:03.960 --> 0:04:04.480
<v Speaker 3>Talk to us a.

0:04:04.480 --> 0:04:07.680
<v Speaker 2>Little bit about the phone part, and in particular whether

0:04:07.800 --> 0:04:10.800
<v Speaker 2>or not just US replacing less often but with much

0:04:10.880 --> 0:04:13.680
<v Speaker 2>more expensive phones is going to be able to what

0:04:14.040 --> 0:04:16.760
<v Speaker 2>makes your numbers resilient going forward? Will that continue to

0:04:16.839 --> 0:04:19.360
<v Speaker 2>upset the fact that we're just buying fewer on them.

0:04:20.080 --> 0:04:22.840
<v Speaker 5>I do, and the reason for that is when you

0:04:22.880 --> 0:04:25.839
<v Speaker 5>start thinking about all of these AI agents that will

0:04:25.960 --> 0:04:29.359
<v Speaker 5>increasingly be running on your smartphone, that is going to

0:04:29.440 --> 0:04:33.719
<v Speaker 5>drive demand for more and more capability on these premium phones.

0:04:34.080 --> 0:04:36.800
<v Speaker 5>And that's great for ARM because if you think about

0:04:36.920 --> 0:04:39.320
<v Speaker 5>a next generation smartphone still has to run games, it

0:04:39.320 --> 0:04:41.159
<v Speaker 5>still has to run apps, it still has to connect

0:04:41.160 --> 0:04:43.320
<v Speaker 5>to the internet. But now you want to run a

0:04:43.400 --> 0:04:45.800
<v Speaker 5>large language model or small language model, and you need

0:04:45.839 --> 0:04:49.080
<v Speaker 5>to interface with a cloud and do security. That all

0:04:49.120 --> 0:04:51.960
<v Speaker 5>requires a lot of compute, much more than in the past,

0:04:52.400 --> 0:04:55.200
<v Speaker 5>which is great for ARM because you can't do it

0:04:55.240 --> 0:04:57.160
<v Speaker 5>without using our technology.

0:04:57.920 --> 0:05:02.600
<v Speaker 4>Renee Bloomberg reported that ARM was interested in buying some

0:05:03.040 --> 0:05:04.160
<v Speaker 4>or all of Intel.

0:05:04.480 --> 0:05:08.479
<v Speaker 1>What's the latest for that, please? Yeah, I read that.

0:05:08.600 --> 0:05:11.400
<v Speaker 5>I'm not sure exactly where it came from, but I

0:05:11.440 --> 0:05:13.160
<v Speaker 5>can't really comment on those kind of rumors.

0:05:14.800 --> 0:05:19.760
<v Speaker 4>Small recent is a licensed dispute with Qualcomm, a longtime

0:05:19.960 --> 0:05:23.440
<v Speaker 4>partner and customer of yours. Wouldn't it just make sense

0:05:23.480 --> 0:05:25.480
<v Speaker 4>for you guys to work it out and settle and

0:05:25.520 --> 0:05:27.880
<v Speaker 4>get something done so you can both just move forward.

0:05:29.960 --> 0:05:31.880
<v Speaker 5>Yeah? So it's an ongoing litigation, as you know ed,

0:05:32.000 --> 0:05:33.720
<v Speaker 5>and in just the baseline things, it's a.

0:05:33.640 --> 0:05:35.080
<v Speaker 1>Pretty straightforward case.

0:05:36.000 --> 0:05:39.839
<v Speaker 5>Consent is required anytime one company buys another company that

0:05:39.880 --> 0:05:43.719
<v Speaker 5>has armed technology. Consent was not granted in this case,

0:05:44.080 --> 0:05:46.760
<v Speaker 5>and just by way of history, every contract we have

0:05:46.839 --> 0:05:49.560
<v Speaker 5>has this clause. And in thirty five years, I think

0:05:49.560 --> 0:05:52.440
<v Speaker 5>we've done one hundred and thirty assignments and one hundred

0:05:52.440 --> 0:05:56.000
<v Speaker 5>and thirty times consent has been granted. This time it wasn't.

0:05:56.640 --> 0:05:59.080
<v Speaker 5>We sent a notification to Qualcom that they were in

0:05:59.120 --> 0:06:02.320
<v Speaker 5>breach of the license. We're very confident in our case.

0:06:02.680 --> 0:06:06.719
<v Speaker 5>But more importantly, this is about fairness. It's about equity

0:06:06.760 --> 0:06:09.919
<v Speaker 5>the ecosystem. We have lots of partners who license our

0:06:09.960 --> 0:06:12.720
<v Speaker 5>technology over the last decades. We need to be fair

0:06:12.720 --> 0:06:15.640
<v Speaker 5>and equitable, and we just now have a situation, an

0:06:15.720 --> 0:06:20.679
<v Speaker 5>unprecedented one where consent was not granted, and as a result,

0:06:21.080 --> 0:06:22.760
<v Speaker 5>we took the action we thought we needed to take.

0:06:23.400 --> 0:06:26.520
<v Speaker 2>How is it doing business therefore with what is a

0:06:26.600 --> 0:06:29.159
<v Speaker 2>key customer but increasingly becoming more of a frenemy.

0:06:31.200 --> 0:06:33.920
<v Speaker 5>Well, you know, in terms of the litigations, I said,

0:06:33.920 --> 0:06:35.760
<v Speaker 5>there's not much more I can add on to it

0:06:36.360 --> 0:06:40.680
<v Speaker 5>From a financial standpoint, we've made assumptions all along when

0:06:40.720 --> 0:06:43.760
<v Speaker 5>we've given guidance and forecast to investors that we will

0:06:43.760 --> 0:06:47.560
<v Speaker 5>not prevail in this case. So we've taken a fairly

0:06:48.080 --> 0:06:51.719
<v Speaker 5>bearish position on the financial outlook. And that's really about

0:06:52.000 --> 0:06:53.960
<v Speaker 5>about all I can say on it.

0:06:54.000 --> 0:06:57.120
<v Speaker 4>Rene At the end market level and product level, what

0:06:57.279 --> 0:07:00.160
<v Speaker 4>is the next phase farm, what's the next story you

0:07:00.200 --> 0:07:01.640
<v Speaker 4>think will carry the company forward?

0:07:03.560 --> 0:07:06.560
<v Speaker 5>Yeah, thanks for asking that question. You know, compute subsystems

0:07:06.880 --> 0:07:09.159
<v Speaker 5>and these are all about taking the pieces of IP,

0:07:09.880 --> 0:07:13.480
<v Speaker 5>stitching them together together, providing them as a full end solution,

0:07:14.080 --> 0:07:17.400
<v Speaker 5>which greatly saves engineering time, time to market, time to

0:07:17.440 --> 0:07:21.520
<v Speaker 5>profit for our partners. That is the direction of the company.

0:07:21.640 --> 0:07:25.120
<v Speaker 5>We've seen amazing traction. We've had lots of design wins

0:07:25.160 --> 0:07:28.400
<v Speaker 5>in the data center space. Media Tech just announced their

0:07:28.400 --> 0:07:32.000
<v Speaker 5>first chip set recently using ARMED compute subsystems for mobile.

0:07:32.560 --> 0:07:35.240
<v Speaker 5>I see that to be pervasive going forward, and it's

0:07:35.240 --> 0:07:38.080
<v Speaker 5>going to allow us to not only get great benefits

0:07:38.080 --> 0:07:41.520
<v Speaker 5>to the customers' markets, but those drive much higher royalties

0:07:41.520 --> 0:07:43.480
<v Speaker 5>than anything we've ever done in the past, which will

0:07:43.560 --> 0:07:44.440
<v Speaker 5>drive growth for us.

0:07:45.600 --> 0:07:48.520
<v Speaker 2>Just paint the picture of where ARM will be in

0:07:48.560 --> 0:07:53.360
<v Speaker 2>the ecosystem. Five ten years from now, you're still majority

0:07:53.400 --> 0:07:55.960
<v Speaker 2>held by soft Bank in terms of your outstanding shares.

0:07:56.240 --> 0:07:58.800
<v Speaker 2>MASA has some big vision one hundred billion dollars to

0:07:58.800 --> 0:08:02.560
<v Speaker 2>put in in terms of creating an AI behemoth that

0:08:02.720 --> 0:08:05.760
<v Speaker 2>complements what you do. But then there's also the element

0:08:05.800 --> 0:08:07.880
<v Speaker 2>of whether you just stick to the designing part of

0:08:07.920 --> 0:08:08.440
<v Speaker 2>the business.

0:08:08.600 --> 0:08:12.520
<v Speaker 3>Where do you take this business? Renee as a CEO, we.

0:08:12.520 --> 0:08:14.640
<v Speaker 5>Have a lot of optionality, Caroline in terms of the

0:08:14.640 --> 0:08:16.080
<v Speaker 5>things that we do, and these are obviously the things

0:08:16.120 --> 0:08:19.560
<v Speaker 5>we talk about all the time internally. Which direction do

0:08:19.640 --> 0:08:22.200
<v Speaker 5>we go, how horizontal do we go, how vertical do

0:08:22.240 --> 0:08:25.800
<v Speaker 5>we go. I'm not able, unfortunately to talk about unannounced

0:08:25.800 --> 0:08:28.120
<v Speaker 5>products this morning with you, although I would love to,

0:08:28.160 --> 0:08:32.360
<v Speaker 5>but I just can't. But we do focus very much.

0:08:32.440 --> 0:08:35.840
<v Speaker 5>We do focus very much on the vertical and horizontal

0:08:35.920 --> 0:08:40.480
<v Speaker 5>nature of the products and also AI and the form

0:08:40.520 --> 0:08:43.280
<v Speaker 5>factors and everything that goes forward. So five to ten

0:08:43.320 --> 0:08:45.440
<v Speaker 5>years ago, from five dicent years from now, I do

0:08:45.520 --> 0:08:47.280
<v Speaker 5>know that ARM will be involved in computing in a

0:08:47.360 --> 0:08:48.000
<v Speaker 5>very large way.

0:08:48.840 --> 0:08:52.040
<v Speaker 3>I'm CEO, Rene has We appreciate the time today. Thank you,