Microchip Stardom Is Within Arm's Reach

Past the potato fields east of Cambridge, England, just around the bend from the Black Horse pub in Swaffham Bulbeck, the headquarters of Advanced RISC Machines Ltd. is abuzz. The converted 18th-century barn is an unlikely place from which to take on Intel, Motorola, and AT&T in the bruising microprocessor wars. But ARM Managing Director Robin Saxby figures he has an edge: "big, powerful friends."

Saxby seems to collect powerful partners. First, Apple Computer Inc. chose the ARM 610 processor as the brain behind its handheld Newton personal communicator, due out later this year. Then startup 3DO, backed by Matsushita Electric Industrial and AT&T, designed the chip into its upcoming home multimedia machine. In March, Sharp Corp. signed on to make ARM's chip. And ARM expects to announce on May 24 that Texas Instruments Inc. will make and sell the chip for use in autos, cellular phones, and other gear.

All that makes 3-year-old ARM a potential powerhouse. If all the deals pan out, says Michael Slater, the editor of Microprocessor Report, a newsletter, tens of millions of ARM chips could be sold annually by the end of the decade. That would give ARM production volumes on a par with such big sellers as Motorola Inc.'s 68000 processor family or Intel Corp.'s superstar 486. "ARM is the new darling of the industry," says Robert J. Conrad, head of TI's U.S. microcontroller business.

CATBIRD SEAT. Behind the ground swell of support is a smart trade-off. In designing its chip, ARM accepted a modest sacrifice in speed in exchange for much lower cost and power consumption. The version that Apple's Newton will use, for instance, runs at roughly the same speed as Intel's 486, but it takes up one-fourth the space and consumes one-eighth the power. And at less than $30, the ARM chip sells at one-tenth the price.

True, the ARM 610 has less than half the speed of other reduced instruction-set computing (RISC) chips from Sun Microsystems, IBM, and MIPS Technologies. "It's a toy," sniffs James H. Clark, chairman of Silicon Graphics Inc., which owns MIPS. But the ARM microprocessor's unique blend of features puts it in the catbird seat to control a new wave of electronic gadgets (table) that require low cost and power consumption.

Take 3DO Co., the San Mateo (Calif.) startup. It doesn't need the fastest chip to run its multimedia machine, which plugs into TVs, because the machine has its own special graphics processors to help out. "ARM provides the most bang for the buck," says Richard B. Tompaine, technology vice-president at 3DO. That's quite an endorsement, considering that one of 3DO's parents, American Telephone & Telegraph Co., is pushing a rival chip, called Hobbit, into some of the same markets.

AT&T's Hobbit nearly got a jump on ARM. In 1988, Apple paid AT&T an estimated $6 million to design a Hobbit forerunner for its Newton. But when Lawrence G. Tesler, now Apple's chief scientist, took over the Newton project in 1990, he switched to ARM. The ARM chip already boasted five years of use in school computers made by a British unit of Italy's Olivetti, Acorn Computers Ltd. "It was far and away above" other processors, says Tesler, who coaxed Acorn into making ARM independent in 1990. Apple put up $3 million for a 43% stake alongside Acorn and chipmaker VLSI Technology Inc., and hired Saxby, 46, a former Motorola executive in Europe.

ASIAN ALLY. ARM's lead in its niche has shrunk to perhaps a year. In addition to AT&T, giants Intel and Hitachi Ltd. are being lured by the potentially lucrative market for low-power 32-bit chips, which is expected to hit $1 billion or more by 1996. And on May 17, Motorola jumped into the fray with the first in a series of chips targeted at similar jobs. "ARM has the right product today," says Clive Gay, a Motorola microprocessor marketing manager. "But we're chasing all the same sockets."

Saxby is hoping more powerful friends can help keep ARM ahead. In March, he signed on Daiwa Securities Co.'s venture-capital fund, Japan's second largest, as an investor and ally to help push the chip to Asian clients. And while his lean staff of 30 engineers designs new generations, Saxby leaves the high costs of manufacturing and marketing to licensees, such as Sharp and TI, while collaborating with each to tailor ARM chips for specific markets.

Will ARM make the big time? Saxby knows that hitching its future to outsiders carries big risks. Demands on ARM's thin development resources from its multiple partners could spin out of control. But if Saxby can pull it off, he could change a tiny English hamlet's mainstay from potatoes to chips.

      PERSONAL COMMUNICATORS Apple's handheld Newton will use ARM chips for 
      recognizing handwriting, faxing, and running electronic messaging and 
      information programs
      AUTOS Texas Instruments will use the ARM technology to combine braking, 
      suspension, and traction controls on a single chip
      MULTIMEDIA 3DO, the AT&T/Matsushita-backed startup, will use the ARM chip to 
      power its new multimedia player, which plugs into a TV
      SECURE PHONES The ARM chip will be at the heart of new telephones that prevent 
      bugging and topping by encrypting conversations and data transmissions
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