ARM showcased as best of British innovation

The recession has been shaping the course of the UK for the past few years, but success stories do exist within the doom and gloom.

The BBC2 show Made in Britain, fronted by everyone's favourite TV economist Evan Davis, has set out to prove this point. Monday night's show focused on the work of chip company ARM as an example of the high-quality innovation the UK can boast.

Davis went to ARM's Cambridge headquarters and spoke to president Tudor Brown, who explained that the company was formed on the back of a request from Apple for a chipset for its PDA device, the Newton, before growing rapidly in the mid 1990s.

"In the mid 1990s the mobile phone revolution started and Nokia was the first to adopt our technology. Now ARM power is pretty much in every mobile phone," he said.

Brown elaborated on the company's strategy, explaining that it makes a huge profit by designing the chipsets but leaving the production and distribution to others.

"We don't make the chips, but we license them to semiconductor companies and we get a licence fee for that. When they make and sell them they also pay us a royalty and we get a few cents on each chip," he said.

"Six billion were made this year, so add that up and it means the company is doing very well."

As Davis noted, this means that ARM is worth around £7bn and is one of the UK's most successful firms, despite being relatively unknown.

ARM works side by side with US companies like Apple, Google and Microsoft, and the firm's chief executive, Warren East, said with a wonderfully David Brent turn of phrase that its innovation-based strategy has helped it to rake in the profits.

"We enable, and we don't pick winners. We believe that sharing a slice of a very big pie is much better than having the whole of a much smaller pie," he said.

ARM's success may be buried deep inside the headline-grabbing gadgets of Google, Apple and Microsoft, but as the BBC found out, it's a success story which proves that the UK can innovate with the best of them.

You can watch the section covering ARM in the show from 23:48 minutes on the BBC iPlayer.

29 Jun 2011