On a warm Friday afternoon in early September, many of the workers at ARM Holdings' chip design center on South MoPac Boulevard convened on the roof of the nearest parking garage to celebrate.
They put on their company T-shirts, drank beer or margaritas and hung out under shade canopies while listening to rock music.
They weren't exactly kicking out the jams, but they were celebrating a job well done: the completion of a major new chip project.
ARM had announced the completion of "Eagle" — officially called the Cortex A-15 processor — a few days before. The new design, which probably won't show up in products until 2012, dramatically expands the capabilities of ARM's product line and the kinds of markets it can serve.
The Eagle had landed right in the middle of a computer market dominated by Intel Corp., the biggest and toughest chip company in the world.
Although ARM is based nearly 4,900 miles away in Cambridge, England, Austin is becoming an important focal point for the company. Four years ago, the Austin team designed the Cortex A-8, which these days is being used in smart phones and tablet computers, including Apple Inc.'s popular iPad. The A-15 could extend ARM's reach into energy-efficient computing, wireless base stations and power-efficient Web servers.
"Our team is square in the middle of ARM's strategy," said Ken Reimer, ARM's design center manager in Austin. "For me, there is no better place to do processor design."
ARM, with about 1,700 workers worldwide, is a smallish chip company that punches far above its weight. That's partly because it licenses many of its designs to some of the biggest chipmakers in the world, including Samsung Electronics Co. Ltd., Texas Instruments Inc. and STMicroelectronics NV.
Analysts say TI and Samsung probably paid millions of dollars to be partners in the Eagle project, taking part in detailed discussions about the processor as it was being designed. Not only could they influence the design that evolved, but their engineering teams also got an early look at the technical characteristics of the new processor, so they could plan their own specialized versions of it in the years ahead. (ARM says the licensing fees and other payments it receives from its partners are confidential.)
"On Eagle, we are all over it," said Keith Hawkins, who heads Samsung's newly created processor design team in Austin. "It is a big part of our future."
Samsung is intent on passing Intel to become the world's largest chipmaker, and expanding its production and sales of low-power processors is a big part of its expansion plans.
In Austin, ARM's team has grown to more than 190 people, including chip designers, sales, marketing and support workers, who work with ARM's many partners. Those customer companies turn ARM designs into about 4 billion chips a year, used in everything from smart phones to computer disk drives and industrial control equipment.
Ahead of the power curve
From its earliest days, ARM has focused on chip designs that minimize electrical consumption. Chips that use less power can be used in more products and require fewer engineering steps to keep them running cool.
Whereas many personal computers use chips that consume as much power as a 100-watt light bulb, ARM chips typically use a fraction of a watt. That miserly power usage makes ARM chips a natural for battery-powered mobile devices and for other products for which power savings are crucial.
In Austin, the company has built an engineering team from veterans of other companies, including Texas Instruments, IBM Corp., Advanced Micro Devices Inc. and Freescale Semiconductor Inc.
Newcomers pick up quickly on the company's relentless focus on reducing power consumption. Every thousandth of a watt counts.
They also tune in to the company's collaborative style. New ideas count, but they are frequently challenged and must be proved to be superior.
"Ideas, no matter where they come from, are openly challenged at all levels," said Kerry McGuire, ARM's manager of strategic alliances in Austin. "There is the sense that if you believe in your idea, you will pursue it, and if it is a good idea, it will survive."
ARM focused on power consumption before the rest of the electronics industry realized how important low-power design would become. Now the entire industry is power-aware.
The industry once focused on performance for PCs and servers, but "the entire industry is now driven by mobile devices," said analyst Jim McGregor with technology research firm In-Stat. "Power efficiency is a key factor in all they are working on — even at the server level. It's a dramatic change, and it brings the whole industry around toward ARM."
Squaring up against an industry heavyweight
Intel, formerly an ARM partner, has morphed into a competitor. Intel acquired an Austin-based ARM design effort in 1998 and later sold the business to Marvell Technology Group in 2006.
While it was selling off that business, Intel was stepping up its effort on a new family of low-power Windows-compatible chips called Atom aimed at mobile products. Atom has become a big seller for Intel, especially in the emerging category of smaller, power-efficient subnotebook computers.
While Intel attempts to stretch toward low-power applications, the company dominates the market for processors that go into servers, the workhorse computers that do the heavy lifting involved in running the Internet and much of the world's business and technical computing.
It's a market where ARM had never openly challenged Intel — until now. One of the potential markets for the Eagle chip is seen as low-power Internet servers that do the repetitive work of fetching information for Web users.
To underscore its new interest in the server market, ARM is one of the investors in Smooth-Stone Inc., an Austin startup that aims to create complex server chips from a basic ARM design. Smooth-Stone thinks there is an important market developing among Web companies that want to buy large quantities of low-power servers to handle their sites.
Analyst Joe Byrne sees the coming rivalry between ARM and Intel as a contrast between two companies with different histories and very different business models. Intel, with its enormous revenue and profit, controls everything about its chips — from the engineering design to the manufacturing and the marketing and sales.
But ARM is a much smaller company that gets by with a lot of help from its friends. It had $489 million in revenue last year, compared with Intel's $35 billion.
ARM licenses its basic chip designs to a wide variety of partners that turn them into more specialized commercial products. ARM makes far less profit from the chips it designs, but it works with many customers, each of which takes its own risks on making and selling its end products.
"The fact that they spread their bets is very good for them," Byrne said. "They don't care if TI loses to Qualcomm Inc. because they supply designs to both companies. They have a lot of horses in the race."
ARM's top executives downplay the budding rivalry with Intel. "People want there to be this David-and-Goliath struggle between us and Intel," CEO Warren East told The New York Times recently. "It just isn't that way."
But in Austin, ARM managers know their new chips are starting to tread on Intel's turf.
"In Austin, we have Intel squarely in our view," McGuire said. "We want to defend our place in the mobile market and go after Intel's stronghold in computing and servers."