Arm profits powered by the rise of smartphones

Arm Holdings, whose chips help run devices including the iPhone, enjoyed a stellar year in 2010, driven by the rise and rise of smartphones; with the chief executive predicting more to come from the industry.

Warren East, the head of the blue-chip semiconductor group, said: "Everything we have been saying about the rise of smartphones over the past six years is now out there in the market. It is very satisfying."

The blue-chip company had record orders in the fourth quarter and beat analyst expectations as revenues rose a third to £407m. Pre-tax profits rose 73 per cent to £167m. "The growth of smartphones still has a long way to go," Mr East said, adding that research firms reported the number of the devices shipped had risen 56 per cent from 180 million in 2009 to 280 million last year.

More than a billion of Arm's chips were shipped in smartphones last year. Mr East predicted that could rise to potentially 4 billion by 2015.

The growth of tablet computers has also become hugely profitable for Arm. Mr East said he had not predicted the market would be this buoyant so early after the launch of the iPad last year, the first tablet to properly breach the consumer market. It has also signed deals to put its chips into digital TVs and smartcards.

Earlier this year Microsoft also revealed that new versions of the Windows operating system would support Arm chips. "That was a big deal. Exactly how big is hard to quantify at the moment," Mr East said.

While management said growth would not be as strong as last year, the company has continued to expand. It increased its headcount by 10 per cent last year.

Mr East dismissed the takeover talk which hit the markets last month, saying its business "favours independence" as it sells to rivals across the industry.