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Apple supplier ARM gears up for driverless cars

Connected and driverless cars are a "great opportunity" for the chipmaking industry, according to the chief executive of British semiconductor company ARM Holdings, after reporting a surge in earnings.

ARM, which is a supplier to many device manufacturers including Apple, reported a 14 percent rise in revenue in the fourth quarter of 2015 to $407.9 million. Profit before tax was up 17 percent to £138.7 million ($200.7 million) year-on-year. Royalties for its technology surged 31 percent on the year.

Speaking to CNBC after the results, ARM CEO Simon Segars, said that the increasing amount of chips in cars is a big focus for the company.

"One particular interest right now that's growing strongly is automotive. We look at the future of that and see the potential for a hundred times growth in computing power in cars which is pretty similar to what we've seen over the past five years in smartphones," Segars said.

"In terms of the market that we can address in 2020, we see that as a $15 billion silicon market which when you do the maths, works out to about $150 of silicon per car. Now you compare that to a smartphone…its' about seven to eight times the silicon content, so great opportunity to us."

Chipmakers are looking for new streams of revenue as the sales of smartphones start to slow -- the auto industry has shown much promise.

ARM OFFICE
Chris Ratcliffe | Bloomberg | Getty Images

Established carmakers as well as technology companies such as Google have all been touting the potential of connected and driverless cars. These vehicles will contain a vast number of chips and sensors in order to recognize the world around it and take autonomous decisions such as emergency braking.

Segars added that while margins on some of those chips will be "very inexpensive", the ones that will be doing the "real computational thinking" such as identifying emergency situations, would "command pretty reasonable margins".

The chief executive's comments come as ARM warned in its earnings outlook that "increased economic uncertainty may influence consumer and enterprise spending, potentially impacting semiconductor revenues and industry confidence". Shares were down over 5 percent.

Segars said that while semiconductors for cars might not be an immediate revenue driver, the company invests in future technology.

"Royalties that are generated today are from products that were in R&D maybe as much as 10 years ago, in some cases 20 years ago. So we really do take a long term view on investments," Segars told CNBC.

ARM is not the only technology firm hoping to get its products into future cars. Processor firm Nvidia, South Korean electronics giants Samsung and LG and Canada's BlackBerry are among some of the companies hoping to take a slice of the developing connected and driverless auto market.

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