Arm

In 1990, 12 engineers in Cambridge started a company that would never build a single chip. Arm-designed processor architectures and licensed the blueprints to anyone who wanted to manufacture them. Building a chip factory costs $5 to $20 billion. Arm skipped that entirely. They drew the plans and let everyone else spend the money building the factories. The licensing deal was elegant. Pay $1 to $10 million upfront for the design. Then pay arm $0.3 to $0.10 for every chip you manufacture. $0.3 sounds like nothing. But when Apple, Qualcomm, Samsung and MediaTek are all shipping your architecture and 30 billion chips go out the door every year, those pennies become $900 million to $3 billion annually. 99% of smartphones run on ARM designs. Every iPhone, every Samsung Galaxy, every cheap Android handset in Lagos and Jakarta. Arms gross margins exceed 95% because the company employs engineers, not factory workers.